In an announcement on Friday, Assistant Treasurer Arthur Sinodinos said the previous government’s reforms “went too far, creating unnecessary complexity, imposing significant burdens on industry and reducing the availability and increasing the cost of advice to consumers”.
Mr Sinodinos confirmed that the government will remove requirement upon financial advisers to have their clients ‘opt-in’ every two years.
“The Government will remove the need for clients to complete unnecessary paperwork in order to continue their arrangement with their adviser,” he said.
The ‘catch-all’ provision will be removed from the best interests duty so that advisers “can be confident that they have provided compliant advice to their client”.
The government will also move to amend the grandfathering legislation to ensure that financial advisers can move between licensees whilst retaining pre-1 July 2013 benefits.
“The current grandfathering provisions are reducing competition in the industry by impeding the movement of advisers between licensees,” said Mr Sinodinos.
The Financial Planning Association (FPA) described the announcement as “a sensible announcement for the financial planning industry and consumers alike”.
But FPA chief executive Mark Rantall said there was still “room to improve”, including the streamlining of the fee disclosure statement process.
Speaking to InvestorDaily, FPA general manager of policy and government relations, Dante De Gori, was quick to point out that the announcement by the government does not constitute a full roll-back of the FOFA legislation – adding that the FPA fully supports the best interests duty.
The Association of Financial Advisers (AFA) said the announced changes to the FOFA legislation would improve the accessibility and the affordability of advice.
AFA chief executive Brad Fox said the initial release of FOFA was “heavy-handed and failed to balance the benefit to consumers with the additional regulatory cost”.
“These sensible amendments from the Coalition eliminate unnecessary red tape and costs,” he said.
The Financial Services Council (FSC) welcomed the clarification of the steps required to meet the best interests duty with the removal of the ‘catch all’ provision.
“We particularly welcome this amendment which means advisers will have confidence that the advice given to clients complies with the best interest duty,” said FSC director of policy and global markets Andrew Bragg.
He added that the existing scenario where advisers were required to provide clients with a comprehensive plan regardless of whether the client wanted it was “ unnecessary, costly and over-engineered”.
But not everyone was thrilled with the announcement. Industry Super Australia (ISA) urged the government to defer its proposed changes to the FOFA legislation.
““ISA urges the Government to stick to the sensible centre or risk further scandals in the financial planning industry,” said ISA chief executive David Whiteley.
“The FOFA laws were the result of years of debate and negotiation. A number of concessions were made by the previous Labor Government to the banks and financial planners before the current laws were passed in 2012,” he said.
Former Labor Treasurer Chris Bowen said in a Tweet that the government’s “reversal” of the FOFA reforms makes “another Storm [Financial], Westpoint or Trio [Capital] collapse more likely”.
Litigation firm Maurice Blackburn said the government’s announced changes could ‘water down’ consumer protection from “unscrupulous financial advisers”.
“The Government’s plan to remove ‘catch-all’ from the best interests duty could water down this essential consumer protection, while the recommended introduction of scaled advice could limit the scope of advice given to clients,” said Maurice Blackburn principal John Berrill.
“While we recognise that some of the reforms will help to clarify the rights and obligations under the laws for both industry and consumers, there are some changes we believe could seriously weaken consumer protection,” he said.
