As he had said he would, in late August the Minister for Financial Services and Superannuation released the draft legislation for the Future of Financial Advice reform.
Yet in a slight twist, the legislation was not delivered as a whole package, but split in two.
While Shorten’s office continued to deny the draft would be released in two tranches in prior weeks, representatives from Treasury and industry bodies said otherwise.
So on 29 August, with the delivery of tranche one out in the public domain, renewed debate and concern that the government’s FOFA draft had not counteracted industry uncertainty surpassed any feelings of surprise.
As predicted, the first draft included opt-in, the best interest duty and the increase in ASIC’s powers to enforce the new elements of these reforms.
“The second tranche, which I expect to release for public consultation shortly, will include the ban on conflicted remuneration (covering commissions and volume payments), the ban on ‘soft dollar’ benefits, the ban on asset-based fees (where there is gearing), and the definition of intra-fund advice,” Shorten said.
“I will also be announcing at that time my decision on the replacement of the accountants’ exemption.”
As promised, the government kept to its opt-in push. While Shorten again kept his promise on the government’s “rethink” on banning risk insurance commissions inside of superannuation.
According to Shorten, the ban on risk insurance commissions will apply to commissions on group life insurance in all superannuation products, and to commissions on any life insurance policies in a default or MySuper product from 1 July 2013.
“These reforms will mean that MySuper will be commission-free,” he said.
As well as clarifying its stance on risk commissions, the government is close to delivering on the term ‘financial adviser’ being enshrined in law.
Treasury will release a public consultation paper by the end of the year on restricting the term ‘financial planner’ in the Corporations Act 2001, the government said in a statement.
“The ongoing consultation around these reforms has been difficult and robust and, as Minister, I thank everyone involved for their time, efforts and patience,” Shorten said.
He also said the reforms would not “unfairly impact” on the stockbroking industry.
Traditional remuneration models in the stockbroking industry would not be unduly impacted on as a result of the reforms, he said.
“Where brokers undertake financial planning activities, the ban on product commissions will of course still apply, ensuring there is no gap in protection for consumers,” he said.
What are your thoughts on the FOFA first draft legislation?
