Brad Fox
The Association of Financial Advisers (AFA) has expressed dismay at the latest claims made by Industry Super Australia (ISA) in its Commissions by Another Name report (the ISA Report) on the impact of the Future of Financial Advice (FoFA) Amendments, calling ISA’s assessment of financial advice sales incentives inaccurate and misleading.
“The ISA Report outlines nine ways that sales incentives have supposedly been brought back to financial advice,” says Brad Fox Chief Executive Officer of the AFA. “The assessment of incentives is erroneous, inaccurate and appears intentionally misleading. On such a critical issue, Australians are entitled to hear the facts, not a compilation of fairy tales from a vested interests group.”
Mr Fox says that throughout the FoFA and the FoFA Amendments debate, the ISA has made a number of claims, many of which have been inaccurate.
“The AFA is tired of inaccurate statements being propagated by the ISA in the market place,” he says. “It is an absolute fallacy that commissions and new sales incentives have been introduced for financial advisers by the FoFA Amendments. The ABC Fact Check team, for example, has expressed a very clear view about the inaccuracies of that argument. The recent announcement from ASIC calling for industry super advertisements to be amended adds further weight.”
The AFA presented an analysis of the ISA’s previous claims to the market on 26 March 2014. “We continue to stand by this position,” Mr Fox says. “We have also expressed our clear view that the term ‘financial adviser’ should not be used in connection with general advice. Financial advisers provide personal financial advice and commissions are not being reintroduced for financial advisers.”
Mr Fox says the AFA believes that the ISA’s deliberate and repeated use of the terms ‘financial adviser’ and ‘financial planner’ in their media releases, along with the publication of the ISA Report is potentially designed to misrepresent the benefits payable to financial advisers providing personal financial advice. “We have said it before and we will say it again – our members, who are financial advisers providing personal financial advice, do not want a return of commissions for superannuation and investments and, just as importantly, the Amendments, do not allow it.”
Mr Fox says many of the claims within the ISA Report are based upon issues that are unrelated to the FoFA Amendments or are hypothetical and unrealistic. “Much of what the ISA has argued is simply impractical in reality as it asserts examples that are either uneconomical or are contrary to the basic rules of running a financial advice or financial services business. It is also important to appreciate that commission paying superannuation and investment products will no longer exist for financial advisers.”
Mr Fox says the ISA Report lacks integrity because it fails to explain which item of legislation/regulation enables the so-called ‘carve-outs’. “For example, what is the wholesale commission that ISA refers to and how is the payment of this benefit to financial advisers possible? It is simply fiction.”
“The ISA has sought to raise extreme scenarios for how conflicted payments could eventuate and fails to consider two important protections: Firstly, the anti-avoidance provisions and secondly, the additional powers that the Government is seeking to ensure that action can be taken against any financial services business or financial adviser who tries to get around the law.”
Mr Fox says the AFA is calling for the ISA to have its analysis independently verified. “In the meantime, the AFA is encouraging observers, commentators, the public and politicians to be very careful about accepting baseless claims on the impact of FoFA Amendments,” he says.
“The success of the financial advice profession is critically important for Australia. The ISA, over many years, has acted to discredit and damage the public perception of financial advice and financial advisers. What is required is for all parts of the financial services community to work together to ensure that consumer confidence and trust in financial advice is enhanced. We need to ensure that great advice is available for more Australians.”
The AFA has provided comment on specific claims made by the ISA below (Appendix A) and outlines why the claims that commissions and sales incentives have been brought back to financial advice are largely inaccurate.
