The Federal Government will, so far as it can, move to implement its Future of Financial Advice (FOFA) changes by regulation to take effect from 1 July.
While welcomed by the key financial planning groups, the Government’s move to impose many of the FOFA changes by regulation instead of fighting it through the Parliament via legislative amendments will raise the ire of the Federal Opposition and elements of the industry funds movement.
However at the core of the changes confirmed by Minister for Finance and Acting Assistant Treasurer, Senator Mathias Cormann today sits a tough approach to conflicted remuneration, including trailing commissions attaching to general advice, and the ability to deal with forms of conflicted remuneration as they evolve.
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.
The changes which will require legislative amendment include clarification of the operation of volume-based shelf-space fees; extension of the time period advisers are required to send fee disclosure statements from 30 to 60 days after the client’s anniversary date and expansion of the regulation-making powers with respect to conflicted remuneration.
Importantly, the Government’s changes will impose an explicit prohibition on any payment made solely because a financial product of a class in relation to which general advice was given has been issued or sold to a client and recurring payment because the person has been given the general advice.
Announcing the changes today, Cormann made clear that the Coalition had explicitly supported he introduction of a statutory best interest duty for financial advisers and a ban on conflicted remuneration or commissions which distorted investment advice.
He said the changes, outlined today, were aimed at striking the right balance between appropriate levels of consumer protection and ensuring the availability, accessibility and affordability of high quality financial advice.
The changes announced by Cormann have been welcomed by the Financial Planning Association (FPA), with its chief executive, Mark Rantall, saying it was both welcome and a common sense.
“The FPA will now lend its weight to seeing through the orderly implementation of today’s FoFA announcement into law, and encourages its members to embrace the upside benefits of operating within a world’s best consumer protection framework,” Rantall said.
