20 November 2014
CHOICE has welcomed the Senate’s decision to restore essential financial advice protections to Australians and is calling on the government to end the uncertainty that has plagued the industry by abandoning plans for any further changes to the law.
“I applaud all Senators who voted to protect consumers, despite a last-minute lobbying campaign by the big end of town,” says CHOICE CEO Alan Kirkland.
“The original Future of Financial Advice laws put the industry on a genuinely professional footing so it can provide the independent, trustworthy advice Australians need and expect.
“These protections are overwhelmingly supported by the majority of Australians,1 and we urge the Government to abandon further attempts to water-down this legislation, risking further uncertainty and adding to compliance costs for industry,” Mr Kirkland says.
CHOICE says the FoFA laws were originally introduced in 2012 and notes the industry has had ample time to prepare for change.
“Good financial advisers have nothing to fear from the consumer protections restored by the Senate last night because they should already be taking every step to act in their clients’ best interests and disclose the fees they charge,” Mr Kirkland says.
“Any advisers that are worried about these changes should not be handling consumers’ life savings in the first place.”
Now that the disallowance motion has passed, the original Future of Financial Advice law and regulations apply. This means that:
- Financial advisers will have a clear and strong obligation to act in a client’s best interests. This obligation will apply at all times.
- The advice received will not be clouded by financial incentives that reward advisers based on how much of a particular product they sell.
- Advisers will be required to disclose fees on a regular basis.
- Advisers will have to make contact with their clients from time to time, to make sure they are happy to keep paying fees.
1. In March 2014, CHOICE conducted a nationally representative survey of 1,005 Australian banking customers. The results were weighted according to the ABS Census 2011. Key results included:
How concerned are you with the following changes?
Bank Tellers in branches will be able to sell complex financial products such as superannuation, without assessing your personal needs or situation and earn a commission for doing so. Total 81% concerned.
Financial advisors will be able to receive commission from financial providers and recommend these products to you on the basis of higher commissions, without necessarily having to consider your best interest. Total 83% concerned.
How strongly do you support the proposal that Financial advisors and planners are required to contact their customers every 2 years to obtain agreement on whether they want to continue paying for their advice? Total 79% support.
The Future of Financial Advice reforms were introduced in 2012 following extensive consultation with industry, government and consumer groups.
Earlier in the year the Acting Assistant Treasurer Mathias Cormann released the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 which removed essential consumer protections from 1 July 2014.
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/consumer-advocacy/campaigns/financial-advice