The lower house of Parliament has passed the government's Future of Financial Advice (FOFA) reforms after independent member of Parliament (MP) Rob Oakeshott drafted an amendment to the contentious opt-in requirement, reversing his own vocal opposition to the measure.
The House of Representatives passed the amended Corporations Amendment (Future of Financial Advice) Bill 2011 by a vote of 60 to 56. It will next go to the Senate.
Financial Services Minister Bill Shorten presented 18 amendments to the first and second tranches of FOFA but, as expected, opt-in spurred the most robust debate.
In presenting an amendment on opt-in, Shorten said of Oakeshott: "I'm particularly indebted to the member for Lyne."
According to amendment (1) ZA284, financial advisers and planners who belong to professional bodies and adhere to an ASIC-approved code of conduct will be exempt from opt-in, a legal requirement that advisers get clients to sign new contracts every two years.
"I thank the minister for accepting this amendment," Oakeshott said.
He said a code of conduct was a sensible, voluntary choice.
"It's an alternate pathway to the dead hand of government," he said.
However, member for North Sydney Joe Hockey said the amendment was another aspect of FOFA that lacked clarity.
"What code of conduct? How is ASIC going to determine the code?"
Hockey said the industry effectively had to satisfy two sets of laws - the code of conduct and the FOFA reforms themselves.
In his speech, Shorten said the FPA had had input into the amendments.
Hockey asked that whether there would be more than one code of conduct that qualified for exemption for opt-in.
"I want to know that is not going to be the only acceptable code of conduct," Hockey said.
"Will there be more than one code of conduct?"
"Yes," Shorten said.
Moments after the bills' passage, opposition assistant treasury spokesman Mathias Cormann released a statement declaring if the Coalition is elected to govern at the next election it would "fix Labor's FOFA mess".
As part of its vow, Cormann said the Coalition would implement all of the 16 recommendations it made as part of the Parliamentary Joint Committee inquiry into this legislation, the statement said.
The recommendations would include the complete removal of opt-in; the simplification and streamlining of the additional annual fee disclosure requirements; and improve the Best Interest Duty.
Cormann said the Coalition would also seek to provide certainty around the provision and availability of scaled advice; and refine the ban of commissions on risk insurance inside superannuation.
"The FOFA legislation passed by the House of Representatives [yesterday] never went through a proper regulatory impact assessment," the statement said.
"From the beginning of this process the Coalition has supported sensible reforms which increase trust and confidence in Australia's financial services industry."
Cormann said the legislation "is regulatory overreach".
"It has failed to strike the right balance between appropriate levels of consumer protection and the need to ensure the ongoing availability, accessibility and affordability of high quality financial advice," the statement said.
