CHOICE says FoFA changes fall short with consumers still in the dark
Statement from Chair of CHOICE, Ms Jenni Mack
The FoFA amendments the federal government tabled on Friday 16th March significantly weaken the disclosure notice, meaning the only way consumers will know about costs for the year ahead will be through the ‘opt-in’ notice.
While the disclosure statement was never an alternative to the opt-in notice, these changes now mean that, without opt-in, consumers will be kept in the dark about the full cost of financial advice. This is because Friday's amendments remove the requirement to provide an estimate of fees for the year ahead from the disclosure notice.
The disclosure statement is now nothing more than a statement of account for the previous year.
In addition, the legislation does not require advisers to disclose commissions to existing clients in the annual disclosure notice. It is now difficult to see the purpose of the disclosure notice for existing clients. It won’t contain commissions and it won’t contain an estimate of fees for the forward year.
In short, the disclosure notice won’t contain anything of much use for existing clients, except for those few who are already paying fees, and there are not a lot of these. It will, however, remain an invaluable statement of account for new clients.
These changes mean the disclosure notice will no longer inform consumers about all the costs they are paying. Only the opt-in notice will put an end to hidden payments and only the opt-in notice will give consumers the facts they need to make an informed choice.
Opt-in also serves other purposes:
- It is designed to end the passive income problem.
- It is a beautiful piece of reform because it works on both adviser and consumer behaviour.
- It ensures advisers are engaged with and service their clients and it ensures consumers are engaged with their advisers and the advice they are given.
- It is a reform that applies the learnings of behavioural economics which has demonstrated that disclosure alone is insufficient to drive engagement with complex financial advice.
Media contact: Ms Jenni Mack– Chair of CHOICE – 0429 300 458