Cormann’s FOFA reforms plan gets mixed reaction
Industry lobbyists are giving the Federal Government's decision to plough ahead with the implementation of some elements of the Future of Financial Advice (FOFA) reforms a mixed reaction.
Minister for Finance and Acting Assistant Treasurer, Senator Mathias Cormann, announced that some elements of the FOFA changes will be implemented by regulation on 1 July.
As previously reported by Money Management, the core changes to be implemented via regulation from 1 July include the removal of ‘opt-in' , the removal of the ‘catch all' provision within the best interests duty, better facilitation of scaled advice and the removal of the fee disclosure requirement for pre-1 July, 2013, clients. However, other elements of the proposed FOFA reforms will require legislative changes.
Industry Super Australia (ISA) chief executive, David Whiteley, raised concerns over the pace at which the reforms were being pushed through, and urged the Government to take a prudent approach.
"Our concern is that if this wind-back of consumer protections were to eventuate, financial advice and product sales would once again be inseparable and consumer confidence in financial planners would be even further reduced," Whiteley said.
"The Government's proposals - lobbied for by banks and financial planners - will create caveats and loopholes. Consumer protections should be ironclad, not subject to fine print."
"ISA is also deeply concerned that the Government would seek to make these far reaching changes by regulation. It is unclear what the urgency is."
However, the majority of other groups showed support for the Government with the Association of Financial Advisers chief executive, Brad Fox, cautioning advisers and consumers to brace for mistruths and false claims about the Amendments from ISA.
"It is categorically wrong to say or in any way infer that the Best Interests Duty has been stripped away," he said.
"The Best Interests Duty is enshrined in Section 961B(1) and it remains unchanged. It is further supported by Sections 961G, 961H, 961J and 961L. Any declarations that the Best Interests Duty has been removed are deceptive and misleading."
SMSF Professionals' Association of Australia (SPAA) described Senator Cormann's decision to push ahead with the reforms as "a positive step in the right direction" for the sector.
"The Minister's statement today should reassure the industry and consumers that best interest duty has not been watered down and will still ensure financial advisors act in their clients' best interests when providing personal advice," SPAA chief executive, Andrea Slattery said.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
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.
