D Day for financial advice reforms

CHOICE invokes spirit of JFK as financial advice vote approaches  

CHOICE says the spirit of four key consumer rights US President Kennedy unveiled 50 years ago this Thursday should guide federal MPs due to vote that day on key reforms around financial planners and their industry.

The people’s watchdog says the benefits of passing the Future of Financial Advice (FoFA) legislation now and in full will mean better, more reliable and less costly advice for Australians around investments and superannuation.

"CHOICE asks the independents in the Parliament to side with everyday people and pass this Bill tomorrow (Thursday March 15). It will increase consumer engagement with their retirement savings and ensure the industry puts their clients’ interests ahead of their own," says CHOICE director of campaigns & communications, Christopher Zinn.

The consumer group says, to date, the issues around conflicts of interest, distorting commissions and informing clients about  how much they are really paying for advice have been cloaked in a technical and complex debate.

“It’s timely that Thursday, when this bill comes before Parliament, is also World Consumer Rights Day. It celebrates the day in 1962 when JFK outlined the four principal consumer rights, and they ring as true today as they did then,” says Zinn.

“While the FOFA reforms are complex, our message to consumers is very simple – ask not what you have done for your financial adviser, but what your financial adviser can do for you.”

In response to lobbying by the financial advice industry for federal politicians to vote against the reforms, CHOICE is highlighting the pivotal role of the independents in passing the legislation.

“On World Consumers Rights day, of all others, we want the consumer’s voice to be heard and acknowledged by all MPs. The provisions of FoFA might be complex but the intent is quite simple and was relayed loud and clear 50 years ago by JFK. Let us not wait another 50 years for proper reform in this key area,” says Zinn.
The right to safety: To be protected against the marketing of goods which are hazardous to health or life. High-profile collapses like Storm have highlighted how higher commissions paid to advisors can incentivise them to drive consumers into unsuitable and risky investments. Reports have shown how the loss of retirement nest eggs late in life can have severe effects on health and well-being. The FOFA reforms will mean advisors have to work in consumers’ best interests.

The right to be informed: To be protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices and to be given the facts needed to make an informed choice. FOFA will help inform consumers better and it will increase consumers’ engagement with their superannuation. The key reform is informed consent to fees and charges and clear annual disclosure of the costs being charged by an advisor. At present it is all hidden payments and secret commissions which mean millions of consumers’ dollars are being drained from superannuation and other investments for advice. Consumers have no idea they are providing this money for nothing to advisors. Ironically these simple requirements for informed consent and annual disclosure are the one area the industry is pushing hard to have removed. 

The right to choose: To be assured, wherever possible, access to a variety of products and services at competitive prices. FOFA will mean more Australians can find more independent and more affordable advice of the kind they need, not just which the industry has chosen to provide. A key reform is known as opt-in, meaning every two years planners have to give their clients the choice to renew the contract for their services. Again, the industry has lobbied furiously to have this reasonable provision dumped.

The right to be heard: To be assured that consumer interests will receive full and sympathetic consideration in the formulation of Government policy.  CHOICE has been campaigning  for more than 20 years to clean up the financial advice industry in which time there have been more collapses and losses and billions of dollars have flowed from consumers to advisors for very little or no work. We know ordinary Australians want to be able to trust the advice industry but sectors within it have resisted and sought to delay the very changes which will both build and maintain that trust. 

Read more about the history of World Consumer Rights Day

Media contact: 
Christopher Zinn – director of campaigns & communications CHOICE – 0425 296 442

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