Actions of one senator undermined advice sector: Trapnell
The actions of one senator reversing their support for the Government's Future of Financial Advice (FOFA) reforms will undermine competition in the advice sector, Synchron director Don Trapnell believes.
Trapnell warned that the disallowance of the FOFA reforms could see Australia's "world-leading" financial advice legislation become "second-rate", with advisers now tied to their existing Australian Financial Services Licensees (AFSLs) as a result of "Hotel California-type legislation around grandfathering", which the Senate reinstated last week.
"We now have, embodied in legislation, the Hotel California clause, whereby advisers can check-out of a licensee arrangement anytime they like, but can never leave without suffering a significant financial penalty — a penalty too severe for most of them to survive," he said.
"A whole sector of Australian small business will be restricted in their ability to choose a means of distribution that is in line with their culture and their business model.
"That's in effect what one senator has done — undermined a competitive market in financial advice and in the process overturned Australia's sense of fair play."
Trapnell said advisers who "bite the bullet" and take a financial hit to switch to an AFSL that enables them "to better service their clients", would be forced to charge them an ongoing fee for service, as a result of the Senate's reversal of support for the Government's FOFA amendments.
"If that happens, clients will obviously be worse rather than better off," he said.
AUTHOR
Nicholas O'Donoghue
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
