FOFA passes, but confusion over enshrining 'financial planner'
The Government's Future of Financial Advice (FOFA) legislation passed through the Senate yesterday, but there seems to be some confusion over whether the terms 'financial planner' and 'financial adviser' will be enshrined in law.
A key part of the agreement tabled by the Financial Planning Association (FPA) and the Industry Super Network in getting the FOFA legislation passed included a proposal that the Government agree to present and table legislation in Parliament by 1 July 2013 that would enshrine the term 'financial planner' in law.
A statement from Minister for Financial Services and Superannuation Bill Shorten announcing the passage of reforms said the Government is "consulting on whether the term financial planner or adviser should be defined in the Corporations Act".
"In light of the passage of FOFA, I am seriously considering accelerating the timetable for the resolution of this matter. I will have more to say about this matter shortly," Shorten said.
If the new legislation is not passed before the next election and Labor is not returned, it seems unlikely the terms would still be enshrined in law, with Opposition financial services spokesman Mathias Cormann recently telling Money Management he was not convinced the extra legislation is warranted.
In a statement, FPA chief executive Mark Rantall said he welcomed the Minister's urgency in supporting the measure to protect the term 'financial planner'.
The legislation passed yesterday finally moved the official start date for hard compliance with the reforms from 1 July 2012 to 1 July 2013 - less than two weeks before the reforms would have taken effect.
The Australian Securities and Investments Commission (ASIC)'s extended powers and anti-avoidance provisions will, however, still come into force from 1 July 2012.
Shorten said the reforms also introduced "a new duty for financial planners and advisers to put their customers' interests first, ban the payment of sales commissions, and make it easier for a wider range of advice to be provided to consumers".
However, Cormann responded angrily to Labor's refusal to further debate proposed amendments to the legislation.
"Labor has arrogantly shut down debate in the Senate and rammed through its flawed Future of Financial Advice legislation without allowing any debate at all on 63 separate amendments," he said.
"The Government even gagged debate on its own confusing and convoluted amendments that would introduce a complex floating start date for FOFA, with a soft start date on 1 July 2012 and a hard start date one year later," Cormann said.
Cormann said the further ASIC guidance that is required to provide certainty for consumers and financial advisers is unlikely to be published until the end of 2012, and ASIC will not release the code of conduct for financial advisers until some time in 2013.
"It is illogical to expect financial advisers to comply with FOFA on 1 July 2012 - even on a 'soft start' basis - when the regulations, guidance and code of conduct will not be in place on that date," he said.
Cormann said the Coalition in government will "fix" FOFA by implementing all of the 16 recommendations it made as part of the Parliamentary Joint Committee inquiry into the legislation, including the complete removal of opt-in, and changes to the best interests duty, fee disclosure requirements, scaled advice provisions, and the ban on commissions on risk insurance inside superannuation.
Association of Financial Advisers president Brad Fox said his organisation was concerned by the amount of detail still missing from the reforms.
"We are still awaiting clarification on key issues. Delays hinder the adviser's ability to get on with business and, as an industry, we have waited long enough," he said.
These included the grandfathering of payments by platform operators and regulatory guidance on codes of conduct, Fox said.
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