Brad Fox

The contents of the newly-tabled report from the Senate Economic Legislation Committee reviewing the Future of Financial Advice (FoFA) reforms are as expected, according to the Association of Financial Advisers (AFA), with the Government in support and the Opposition and the Greens opposed to the FoFA Amendments.

AFA CEO, Brad Fox, said while both sides want enhanced consumer protections, it is the way that comes about which is contested.  “The Government wants to see a sensible balance of safeguards that protect consumers, but still encourages people to seek financial advice,” he said. “The Opposition and consumer groups appear to want enhanced consumer protection, even if the protection provides no additional value to the consumer.”

However, Mr Fox said FoFA was an important and necessary process for the financial advice profession to go through. “We strongly support the introduction of the Best Interests Duty and the ban on commissions for superannuation and investments,” he said. “Despite comments and media coverage to the contrary, these amendments are not about removing, but improving FoFA, to create greater trust and confidence in financial advice and improve access and affordability to quality advice.”

Mr Fox said the AFA appreciates the debate about commissions and the proposal for a general advice exemption. “We agree with the thinking of the Senate Committee on this and encourage the Government to ensure that benefits payable on the provision of general advice are not structured as commissions.  This should not prevent a sensible model based upon employee bonuses. We do not believe that financial advisers who provide personal advice should be able to access the general advice exemption.”

While the report contained few surprises, Mr Fox said the commentary on scaled advice was contentious. “It is most surprising to see the one sector of the industry that will operate primarily on the basis of intra-fund advice come out opposing changes to improve access to scaled advice,” he said. “The discussion about the risks of the adviser scaling the product options to one provider is ironic given that intra-fund advice is limited to advice on the member’s holding in their existing superannuation fund. These opponents need to either support both scaled advice and intra-fund advice, or oppose both. Consumers cannot be expected to cope with two different sets of advice rules for what appears to them as the same scenario.”

Mr Fox said commentators who claim that those in favour of the FoFA Amendments are exclusively large financial institutions are wrong.  “There were many views put forward by a range of other parties, including leading law firms in support of the need for change.  It is wrong to say that this is simply a matter of the financial services industry fighting for self-interest.”

FoFA affects financial advisers, many of whom are small business owners seeking to control their own destiny. “While some are licensed by an institution, they are certainly not controlled by that institution,” Mr Fox said.  “As small business owners, their objective is to grow their business by providing high quality advice that is valued by their clients.”

Mr Fox said there is an alignment between the interests of the small business adviser and their clients.  “In this entire debate, we need to reflect upon the fact that in Australia the majority of financial advice is provided by small practices within the local community or country town and as such represent a small business activity. Most advice is not provided by the bank or institution,” he said. “We also need to acknowledge the body of evidence that proves that financial advice is very good for those consumers who have access to it, and as a country we should be encouraging financial advice, not making it more difficult and costly to obtain. Yes we need to ensure clients are well protected and the FoFA Amendments achieve that with greater clarity than the original legislation.”

“We now look forward to discussing the report with the Government and progressing toward seeing legislation enacted that can finally give our members certainty.”

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