FOS warns FOFA may disadvantage unwitting clients
The opt-in provisions of the Government's Future of Financial Advice (FOFA) legislation may have to be modified to prevent retail clients being disadvantaged if they do not respond to renewal notices, according to the Financial Ombudsman Service (FOS).
In a submission filed with the Parliamentary Joint Committee reviewing the FOFA bills, the FOS pointed to circumstances where retail clients might not be able to respond to the renewal notices, and therefore be penalised by the termination of their financial adviser/client relationship.
The FOS submission said it was particularly concerned about clients who had investments which required ongoing financial advice and who found their relationship with their financial adviser being terminated because of the terms of the bill, rather than because they actually wanted to end the relationship.
The submission pointed out that retail clients might be genuinely unable to respond to renewal notices for a range of reasons including illness, long holiday absences and difficulty understanding technical documents.
What is more, the FOS argued that the groups most likely to be affected were retirees and vulnerable and disadvantaged consumers.
The FOS submission argues that a safety net may need to be applied to the FOFA arrangements, including a clearer explanation of the consequences of not renewing or a requirement that financial advisers who do not receive renewal notices send follow-up notices.
AUTHOR
Mike Taylor
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.
