The Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 was introduced in parliament by the parliamentary secretary to the Treasurer, Steven Ciobo, yesterday morning.
The Financial Services Council (FSC), which this week released new legal advice that argues the changes to the best interests duty will not reduce consumer protection, was quick to welcome the tabling of the legislation.
FSC chief executive John Brogden said the government had “fulfilled its mandate” by making the changes to Labor's laws.
“Technical amendments in the legislation will now allow consumers to get the advice they can afford and want,” he said.
But Industry Super Australia (ISA) labelled the introduction of the legislation into parliament a “backward step” for consumers and the advice industry.
ISA chief executive David Whiteley said the bill will do “more harm than good” and “comes despite a groundswell of concern from consumer groups, seniors groups, finance specialists, superannuation funds and even financial advisers themselves”.
“In seeking to cut red tape the government hasn’t adequately taken into account the potential costs to consumers and the industry from re-permitting commissions through general advice and weakening the best interests duty,” he said.
Attempts to “reduce red tape” could well end up being outweighed by consumer losses and “reputational damage” to the advice industry, said Mr Whiteley.
The Financial Planning Association (FPA) sought to trumpet its successful lobbying when it came to general advice and conflicted remuneration.
FPA chief executive Mark Rantall welcomed the “11th hour” amendment of the general advice component (as compared with the draft amendment).
“[This change] essentially restricts the receipt of conflicted remuneration to employees only of a financial services licensee,” said Mr Rantall.
“Whilst this policy shift tightens the pre-conditions under which conflicted remuneration can be paid and is welcomed, the FPA still calls for the removal of the ability to reintroduce superannuation and investment commissions on general advice altogether,” he said.
Mr Rantall also highlighted the “pragmatic reductions to red tape” including the removal of: the opt-in requirement, the retrospective application of the fee disclosure statement and the catch-all provision of the best interests duty. He also welcomed the “facilitation of scaled advice”.
Further, the Australian Bankers' Association voiced its support for the tabled legislation.
ABA chief executive Steven Münchenberg said the changes will allow FOFA to operate as “originally intended”.
“The limited exemption for general advice is a sensible balance and will ensure that banks can continue to provide free, simple and general advice,” he said.
“We also commend the government for providing the industry with certainty and clarity, in particular making sure the existing banking exemptions work seamlessly and allow bank tellers and bank specialists to continue to provide information and advice on basic, retail banking products and making sure financial advisers are able to confidently provide scaled advice and meet their ‘best interests duty’ obligation,” said Mr Münchenberg.
