Andrea Slattery
Finance Minister Senator Mathias Cormann’s statement on the Coalition Government’s FoFA amendments is a positive step in the right direction for the financial advice industry, says the SMSF Professionals’ Association of Australia (SPAA).
SPAA CEO Andrea Slattery says it has always been the organisation’s position to support the removal of the best interest duty catch-all provision because of its potential to be too broad in its application, create uncertainty and involve a high compliance burden for financial advisors.
“The Minister’s statement today should reassure the industry and consumers that best interest duty has not been watered down and will still ensure financial advisors act in their clients’ best interests when providing personal advice.
“This was a point made strongly by SPAA’s Patron and former Chief Justice of the High Court, Sir Anthony Mason, at the 2014 SPAA National Conference, when he said: ‘If it should come about that some aspect of the best interests duty is to be wound back, it would be a grave mistake to think that a financial advisor is under no duty to act in the interests of the client.
‘Quite apart from relevant statutory provisions, the common law imposes a duty on an advisor to act in the interests of its client’.”
“We were also encouraged by the Minister’s commitment to improving the professionalism of financial advice through lifting professional, ethical and educational standards. These are goals at the core of SPAA’s pursuit to improve the competency and quality of financial advice delivered to SMSF trustees and consumers more generally.”
In regards to the announcement on conflicted remuneration and general advice, Slattery says the Minister’s announcement is a positive move which helps in addressing the industry’s concerns about the conflicted remuneration exemption.
“It is encouraging that the Government has listened to the industry’s concerns on this issue and has heeded them.”
SPAA has been concerned about the ramifications of the conflicted remuneration general advice exemption, but is reassured by the Minister’s announcement that there will be no wholesale reintroduction of commissions to financial advice.
“We are especially pleased to see that the amendments will still prohibit ‘any payment made solely because a financial product of a class in relation to which the general advice was given has been issued or sold to the client’.”
SPAA supports the Government’s intentions to put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration to stop institutions inappropriately using the conflicted remuneration exemption.
Slattery says: “We will be keeping a very close eye on how industry practices develop around the provision of general advice and the conflicted remuneration exemption and will continue to work closely with the Government to ensure that the exemption does not lead to undesirable advice practices and consumer outcomes.
“SPAA sees FoFA as a critical element in improving the quality of financial advice and increasing consumer protection. However, in the longer-term SPAA wants high-quality financial advice to be driven by a professional industry of competent advisors.”
“We have proposed a streamlined financial advice licencing model that removes the general advice category and has a simple split between a consumer being provided with factual/sales information or personal financial advice.
“This model promotes professionalism of financial advice and is easier for consumers to understand the nature of the advice they are receiving,” Slattery says.