28 December 2013
CHOICE says the needs of consumers must to be given more consideration in reforms to the Future of Financial Advice (FoFA) legislation announced by the Federal Government today.
The consumer group has advocated strongly over many years for reforms to the financial advice industry, based on evidence of conflicts of interest and the millions of dollars in passive fee income paid by consumers when they may be receiving no advice.
“Professional financial advice requires professional advisers, and the FoFA reforms were an important step towards creating an industry that puts consumers’ interests first,” says CHOICE CEO Alan Kirkland.
“We are concerned that this progress will be reversed if these changes proceed as announced, and that the problems that CHOICE and others have identified in the financial advice industry over two decades will be perpetuated.”
CHOICE’s key concerns are:
- Changes to the ‘best interests duty’ may mean consumers are not protected from poor quality financial advice. In particular, changes around the provision of ‘scaled advice’ may allow advisers to effectively ‘contract out’ of their duties to consumers.
- Exempting general advice from the ban on conflicted remuneration may allow continued bias and miss-selling in the general advice area.
- Removing the requirement for clients to actively opt-in every two years if they continue to pay fees ignores a very significant issue of consumer harm - millions of dollars of advice fees being charged where no advice is being provided, eroding individual and national savings.
“We recognise that the financial advice industry has campaigned aggressively for repeal of the FoFA reforms but if the Government persists with these changes, we would urge it to consider alternate means of protecting Australian consumers from the very real costs and impacts of passive fees and conflicted financial advice,” says Mr Kirkland.