Brad Fox
The Association of Financial Advisers (AFA) welcomes the release this morning of the Government’s details relating to the Future of Financial Advice (FoFA) amendments, but is cautioning advisers and consumers to brace for mistruths and false claims about the Amendments.
In assessing the release from Senator Cormann, Minister for Finance, AFA Chief Executive Brad Fox, said, “It is absolutely clear that the protection of consumers will remain enshrined in law with Section 961B(1), which confirms that the Best Interests Duty remains unchanged.”
Mr Fox said it is also clear from comments relating to Grandfathering that both the interests of advisers and their clients will be served. “The Grandfathering issue has been resolved – clients will be able to retain existing products when their adviser changes licensees, where it is prudent to do so,” he said. “We have worked diligently on this issue and are very pleased to see it is being resolved. We are further encouraged that the Opposition has also expressed its support for repairing the Grandfathering provisions which have significantly reduced competition and consumer rights.”
However, Mr Fox cautioned advisers, their clients and the public to be prepared for inaccurate and misleading claims in relation to the FoFA amendments. “We have seen blatant mistruths, as recently as this week, on the FoFA issues and it is likely that we will see them again now,” he said. “The Industry Super lobby will again attack these reforms because in most cases they do not benefit when members of industry super funds see a financial adviser.”
Mr Fox said the AFA believes the Industry Super lobby will again claim that consumer protections have been stripped and the Best Interests Duty has been removed. “It is categorically wrong to say or in any way infer that the Best Interests Duty has been stripped away,” he said. “The Best Interests Duty is enshrined in Section 961B(1) and it remains unchanged. It is further supported by Sections 961G, 961H, 961J and 961L. Any declarations that the Best Interests Duty has been removed are deceptive and misleading.”
What is being amended, Mr Fox said, is the guidance for financial advisers on what is required to meet the Best Interests Duty. “A substantial amount of legal opinion from highly respected, experienced experts in financial services law indicated that the removal of subsection 961B(2)(g) – the so called ‘catch-all’ phrase – improves the legislation and has no material impact on the protection of consumers. The catch-all phrase did not add to consumer protection, it merely increased uncertainty for advisers, which meant the cost of providing advice has risen. This amendment is a sensible and pragmatic decision that will lower the cost of advice for clients.”
Mr Fox said the Minister has also made it very clear that financial advisers providing personal advice on matters like superannuation and investments will be prevented from receiving commissions. “The AFA has gone to great lengths to help the media understand the difference between general advice and personal advice and how this relates to the General Advice Exemption on conflicted remuneration,” he said. “It is abundantly clear that financial advisers will not be benefiting from a return to commissions on superannuation and investments. The Minister has spelt it out clearly and consumer groups and opponents to the amendments need to read the detail. Financial advisers will not be receiving commissions on these products. The public will be able to see a licensed financial adviser with complete confidence that when they get superannuation or investment advice no commissions will be payable.”
The AFA also welcomed other reforms including the removal of the paternalistic ‘Opt-In’ requirement. “Any client paying fees to an adviser can contact that adviser for advice at any time,” he said. “The better facilitation of scaled advice is also a sensible pragmatic step that will see consumers protected and the access and affordability of advice improved. Advisers are often faced with the dilemma of wanting to help clients with relatively simple needs and at a reasonable price. This will be possible when this reform is enacted.”
Mr Fox said the AFA is also very pleased to see support for the extension of the notice period to provide Fee Disclosure Statements (FDS)’s increased from 30 days to 60 days. “The AFA raised with the government the need to amend this on the basis that it will increase the contact between advisers and their clients, as many advisers will provide the FDS in face-to-face reviews with their clients.”
The AFA also supported the process put forward to managing the introduction of these changes saying that it appears pragmatic. “The advice profession has taken significant steps in the last five years to raise the standard of advice and heighten focus on their clients,” Mr Fox said. “This momentum is well established and with the support of these reforms more Australians will be able to get great financial advice. We look forward to the Parliament considering these reforms in detail.”
