02.How could consumer protections have helped Lyndi?
The Future of Financial Advice (FoFA) protections were brought in to improve the quality of financial advice and build trust in the financial planning industry, in the wake of a series of high-profile scandals that saw consumers lose hundreds of millions of dollars.
They did not become mandatory until 1 July 2013, too late to help Lyndi.
FoFA gave consumers seeking financial advice significantly stronger protections, enforced through the corporate regulator.
Now the government is seeking to axe many of these protections, by proposing changes that will:
- water down the obligation that an adviser must act in the client’s best interest
- allow advisers to bypass the obligation to act in their client’s best interests when scoping what will be included in advice
- add extra exemptions that will allow advisers to place their own or their employers’ interests ahead of their clients when recommending certain products, like general insurance
- add extra exemptions on conflicted remuneration that will reinvigorate a sales-driven culture in financial advice, encouraging mis-selling
- remove the obligation to communicate costs to all clients through annual statements
- remove the protection that clients must opt-in to ongoing advice every two years, which stops people paying for ongoing advice they no longer require.
People like Lyndi are significantly better off under the current law. We are calling on all federal politicians to put Australian consumers first and stand by our consumer protections.