Conflicted remuneration should be defined in law
The SMSF Professionals' Association of Australia (SPAA) has claimed that explanatory statements dealing with conflicted remuneration and general advice would have little effect in practice and need to be addressed via legislation.
SPAA's comments follow the release of a report from the Senate Economics Legislation Committee which recommended the Federal Government proceed with amendments to the Future of Financial Advice (FOFA) legislation.
SPAA stated that while it supported changes to the the catch-all provisions of the best interest duty requirements other amendments in the area of conflicted remuneration and general advice "could seriously weaken the policy intent of FOFA to protect consumers".
"We believe that the introduction of a best interest duty and the banning of conflicted remuneration were key elements of the reforms and are essential to maintaining the consumer protection focus of FOFA," SPAA chief executive Andrea Slattery said.
"Although the recommendations of the committee to clarify the operation of the legislation will change the wording in the explanatory material accompanying the legislation, the reality is this will have little effect in practice."
"What needs to be done is to make the legislation perfectly clear on this issue instead of trying to clarify its operation through the explanatory statements accompanying the legislation."
Slattery said SPAA regards FOFA as critical in improving the quality of financial advice and had strongly supported the reforms around best interest duties and the elimination of conflicted remuneration as well as clarifying the distinction between sales information and personal advice.
"If financial planning is to become a true profession and provide sound financial advice to clients, the industry needs to adopt professional characteristics that requires a delinking of the product from the imbedded remuneration arrangements, including commissions," she says.
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