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Government opts out of consumer protection

CHOICE calls on parliament to repeal regulation removing financial advice protections

30 June 2014

CHOICE is calling on federal politicians to oppose regulation which winds back essential protections for consumers seeking financial advice. 

Today, the Government revealed regulation that removes critical consumer protections introduced as part of the Future of Financial Advice, or FoFA, reforms. The regulation has been publicly released just 10 hours before it is due to come into effect on 1 July 2014.                                                                             

“This regulation once again exposes consumers to significant risk. We have seen scandal after scandal where financial advisers have taken advantage of their clients. Storm Financial, Trio, Opes Prime, Commonwealth Financial Planning: these events and more show that the financial planning industry has left a trail of destruction and consumer suffering,” says CHOICE CEO Alan Kirkland.

“The removal of consumer protections takes place just days after a Senate Inquiry proved, once again, that consumers need more protection, not less.”

Although the regulation takes effect from 1 July 2014, it can be repealed through a disallowance motion which may be introduced by any Senator or Member of Parliament.

“CHOICE is calling for all politicians to protect their constituents. The regulations will take effect from 1July but parliament is still able to repeal these changes. The debate on FoFA is far from over.”

“We are asking federal politicians to protect basic principles. Consumers must be able to feel confident that they are getting impartial financial advice they can trust.           

“If financial advisers are going to charge fees, they should be required to disclose the fees on a regular basis.

“They should also make contact with their clients from time to time, to make sure they are happy to keep paying fees.

“Financial advisers should have a clear and strong obligation to act in a client’s best interests.

“And their advice should not be clouded by financial incentives that reward them based on how much of a particular product they sell.

“The regulation introduced today removes these protections, which is why we oppose them,” Mr Kirkland says.

CHOICE has launched a petition calling on all politicians to oppose the wind back of FoFA at www.choice.com.au/consumer-advocacy/campaigns/financial-advice

FoFA Background

The Future of Financial Advice reforms were introduced in 2012 following extensive consultation with industry, government and consumer groups.

Today, Acting Assistant Treasurer Mathias Cormann released the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 which will remove essential consumer protections from 1 July 2014.

The Senate Committee on Economics released the final report for the Inquiry into the Performance of the Australian Securities and Investments Commissions (ASIC) on Thursday, 26 June.

CHOICE has strongly opposed all changes to the FoFA protections. For more information see CHOICE’s submission to the recent Senate Committee Inquiry examining these reforms: http://www.choice.com.au/money/financial-planning-and-retirement/financial-planning/articles/fofa-financial-adviser-reform

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