The Future of Financial Advice (FoFA) Bills have been passed by the House of Representatives after more than two hours of heated debate between the Government and Opposition last night.
As indicated by the Minister for Financial Services and Superannuation, Bill Shorten, earlier in the day, the Government tabled amendments to both Bills and updated Explanatory Memorandums.
The Opposition, led by Shadow Treasurer Joe Hockey, also tabled amendments to both Bills, but these failed to achieve the necessary number of votes to be added to the legislation.
The Independent MPs, Rob Oakeshott, Tony Windsor and Andrew Wilkie, who had been lobbied heavily by the industry throughout the process, all voted with Labor.
The Bills will now pass to the Senate for consideration. As Parliament has now broken for Easter, the next Senate sitting date is Tuesday 8 May.
Further analysis of the key areas of debate is provided below…
Opt-in amendment
Among the amendments tabled by Minister Shorten was a change to the opt-in requirement, granting ASIC class order relief for advisers who signed-up to a professional code of conduct.
“The Government will give ASIC the ability to exempt advisers from the opt-in obligation if they are satisfied that the adviser is signed up to a professional code which obviates the need for opt-in,” said Mr Shorten.
“This ensures that consumers are adequately protected – either by a professional body, or failing that, the opt-in provisions in the law.”
(For the full wording of the amendment, see: Opt-in Class Relief Offered.)
In his speech to the House, Minister Shorten acknowledged the work of Mr Oakeshott, who he said was responsible for negotiating the amendment with industry.
Speaking on the amendment, Mr Oakeshott said: “As an alternative to the opt-in path I think a code of practice is a sensible cultural move. It will encourage greater professional standards… If that is all too hard and for some reason that does not work for you, then quite rightly there are opt-in provisions to make sure you participate in the cultural change and the professionalisation, making sure that we have financial products and financial advice delivered to the standard that I hope this House expects.”
Is it not correct to say that vast numbers of groups in the financial services sector were not even consulted about this amendment?
In response to the amendments, Mr Hockey railed against the Government for doing what he called a shonky deal: “Is it not correct to say that vast numbers of groups in the financial services sector were not even consulted about this amendment?”
Mr Hockey fired numerous questions about the specifics of the new relief arrangement at the Minister. Among them was a clarification that ASIC would be prepared to approve more than one Association’s code of conduct to grant relief to its members.
“There was a negotiation with the Financial Planning Association,” Mr Hockey said. “They had a code of practice. I want to know on behalf of all the other industries that that is not going to be the only acceptable code…”
Minister Shorten replied with a simple, “Yes.”
Mr Shorten also confirmed that ASIC would provide a resolution on the acceptable codes of conduct by 1 July 2015, to determine which Associations’ members were eligible for the relief.
Despite the vigorous debate, the opt-in amendment, along with 17 other changes to the first FoFA Bill, were passed 64 votes to 59.
Best Interests duty and Scaled Advice
The Government issued amendments to the wording of the second FoFA Bill that took account of industry concerns as to whether the Best Interests duty allowed for the provision of scaled advice.
“(This amendment) responds to concerns by industry about the capacity of financial advice to be scalable in light of the new best interests duty. The amendment includes a note clarifying that a client may seek scaled advice and that the inquiries to be made by the financial adviser into the client’s relevant circumstances will be tailored to the advice sought.”
Annual Fee Disclosure Statement and Opt-in
The Government provided further clarification on fee disclosure statement requirements, including the removal of the requirement to specify the amount the client will pay in the forthcoming year.
The Minister also confirmed that an adviser does not have to ‘send’ the opt-in renewal notice but can provide this notification in a number of alternative ways.
Based on these new laws, maybe real estate agents should be the next industry where they charge on a fee for sevice basis and not commission based on the Value of the house they are selling.
I am pretty sure they would not like this idea!!
Here here David, I couldn’t agree more but the Government won’t take on the Real Estate Industry, they are too powerful.
The cynic in me sees the membership of a “professional code” of conduct noted above as a member grab by the FPA.
After a breach of personal privacy & lack of confidence in the management and direction of the FPA, I chose to let my membership lapse. Now, to comply with legislative carve outs, I may be forced to re-join a body I have no confidence in, simply to comply with a “professional code of conduct”.
So not happy about this behind the scenes manipulation!
After all, who is being protected? The client or an industry body?
Interesting! Minister Shorten states in the amendements that “This ensures that consumers are adequately protected – either by a professional body etc.etc.” one of the reasons given for the need to introduce the new legislation was due the events surrounding Storm Financial – were they not a member of this same peak body? would they have changed business practice if the GFC had not interveined and would they still operate under this peak bodies code of practice?
So let’s be clear here; Opt In has now been passed in, in the Lower House and will be legislation once it clears the Upper House. The only way it doesn’t apply is if ASIC decides to grant class relief to advisers coverd by an Professional body. IF. No restrictions on what ASIC might determine is a requirement before it issues the class relief discussed. Frankly, the cynic in me suggests that unless Opt-In rules or similar are incorporated into an Associations Code of Conduct, then ASIC won’t offer relief. I think it’s a bit early for everyone to be jumping for joy and sending messages of heartfelt congratulations.
After completing a CFP, I also have an MBA and a BSc. I saw the FPA’s complicit agreement with the Industry Funds and Labour over the FOFA provisions. This happened under the previous female director who now works with Mercer in a managerial role, keeping those at the top happy I am told. History repeats itself. Her tenure at the FPA saw it drive into a $2m loss. I gave up my membership as over time they have gone from charging $300 per annum to around $1,000 per annum. Why should I pay money to a body that does nothing for the industry and lets people like Shorten, Oakshot and Windsor and Wilkie dictate to us when they do not fully appreciate the damage they are doing to the Australian people. We know that they are only one term wonders but the damage they are doinig and the leg up they are giving to the Industry Funds is amazing. Like everything Joe Public is pretty oblivious as to what is going on. Vote them out this coming election and make the opposition repeal legislation that is clearly driven by the Industry Funds. Labour what a bunch of hypocrites!
Well this is actually a great result for those who aspire to belong to a true profession.
Opt in was always a disaster waiting to happen.
I say well done FPA.
Aha, the truth emerges – as we always knew it is the ISN running Bill’s campaign and they have struck a mortal blow at the weakest link- the FPA conned again.
Who do the FPA think they are negotiating issues for nonmembers. Time for you remaining members to leave & join AFA
Gents,
funny how the FPA the night before denied the deal in an email to me. Shorten says the deal was done with FPA/ISN . I will not join the FPA under any circumstances and will be proud about being a member of the AFA. I hope my licensee is listening because the FPA is a dictator.
MikeM – I am willing to bet the ISN are not happy with this. I am sure that the AFA will get their cone of conduct approved by ASIC and you can stick it to the ISN also. No one is saying you have to join the FPA.
Saw reference to Storm as a member of the FPA#?***
a HIGHLY DISREPUTABLE COMPANY USEING EXTREME PLANNING METHODS BUT obviously a jewel in the FPA’S crown for following their code of conduct . I mentioned once before here that I was told ASIC wont be going after Storm because their SOA’S WERE SO PERFECT THEY CAN NOT TOUCH THEM. SO MUCH FOR THE FPA.what have we allways been in business for OH I FORGOT IT’S TO KEEP ASIC HAPPY AND FOLLOW THEIR RULES never mind carefull business practice.Anybody who did the type of double gearing that was happening in the two years up to the GFC was reckless with peoples assetts and should be judged on that not onhow well written the SOA WAS.i HAVE LOST FAITH WITH THE REGULATORS THE GOVERMENT AND THE INDUSTRY.I MIGHT BUNDLE UP MY SUPER PORTFOLIO SUCH AS IT IS AND SELL IT and just write life bisiness for a while.
BUT…. i WILL STAY AROUND LONG ENOUGH TO WATCH sHORTON AND HIS LABOUR MATE CONSIGNED TO THE RUBBISH BIN OF OPPOSITION.JG
@Mark. Are you sure Opt In will not be a required by the Codes when ASIC makes becomes the chief?? Too much detail not clear yet. The overall FoFA result is a shame given the deal resulted in the rest of the FoFA Amendments being overlooked. ISN and Shorten played FPA too easily. Rantal and FPA will never speak for me
FPA has rolled over like a dog in return for a self interested ‘treat’ of a captured member base. Their relevance is dwindling, even CFP’s like myself are looking for alternatives after being initially trapped by a designation and they have done a joint deal with the Devil (ISN – In Sat*n’s Name) and head red haired Demon…. screw the member’s we’ll push for ‘professionalism’ like that ever has had anything to do with fees Mark, it’s an attitude & approach not a billing method. Kinda like having a professional approach to actually representing your members, maybe you should look up the definition.
Yes I’m sure because one negates the other and the intention is clear that opt in will not apply if a code of conduct is approved.
ASIC is not the ISN.
Ted … totally agree!
FPA has not rolled over, we would have got no changes at all if they had not been opposing the opt in measures, in the end it was one independent who seems to have forced a change otherwise we would have got opt in.Opt in has nothing to do with how we are paid. Commission was always going to be banned but we were also looking down the barrell of all existing commission being banned too. I think some credit to the FPA is due here.
@MikeM Your choice whether you join the AFA or whomever. The opt – in vote was over the line regardless of FPA negotiation and if your not happy with the deal arranged by the FPA there is an easy solution for you. Don’t sign up for a Professional code of conduct and follow the law. Same result for you then as if no deal had been done. Good job FPA better to raise the standard along the way. CFP 18 you are obviously not happy so please leave FPA and hand back your CFP. Your commentary is not professional nor is your attitude or approach. None of the values you espouse can be attributed to your comment and it is you who needs to look up the definition of professional as you clearly have no idea what it refers to. P.S. Professional FPA members wont miss you
Let’s get into reality here. Shorten would never have made a deal if he had the numbers. Wake up people!!! Much of FoFA was about transparency and the FPA has done a deal behind the industry’s back. Fail FPA, you aren’t transparent. It was an act in line with their co-conspirator ISN, use of regulation to gain a competitive advantage, a desperate act. Their action had a downside – the rest of FoFA went through wihthout debate or amendment. Advisers 0 – ISN 1.
Wow – Simon, touched a nerve have we? Love to check yor work out & do a comparison on ‘professional’ approach. You monologue sounds biased, chances are so is your advice…
You’re also sounding just a little like a petulant child there, especially by badly attempting to paraphrase my ‘definition’ discussion… can almost see your dummy fly across the room and hear that foot stomping.
If FPA allowed the CFP designation to be free of all ongoing encumberances, be interested how many would remain members.
The theory of ‘Opt in’ is like the theory of communism. It sounds great and everyone will be treated equally.
The reality is totally different.
Anyone who has direct experiance advising clients with regards to Insurance, knows that client apathy is the biggest hurdle to overcome.
Getting the client to OPT IN when selling Insurance is crucial. However, once that mountain has been climbed, clients push the Insurance to the back of their minds and relegate their thoughts to more important issues (In their minds)like their loans,kids,Investments, holidays, walking the dog etc.
Client apathy will mean clients will OPT OUT by virtue of not remembering to OPT IN.
Then when a claim arises and we are not registered to help the client, what are we and the client supposed to do.
Our Business has a 100% SUCCESS RATE with our clients claims over the 25 years we have been looking after our clients and we have never charged a cent for the countless hours we have put in. We are paid by the renewal income. If that ceases due to a client forgetting to OPT IN, how can we run a Business and represent our clients?
After 25 years in the Business, I feel I understand how clients think, it would be nice if the Government bothered to actually ask clients what they think, considering the clients are what this is all about.
Many comments here. It seems with all the talk and lobbying by one and then the other what we should see is an industry which is more professional from the public’s perception.Very few amongst them will have any idea of what FoFA is let alone know anything about it.
It seems a special interest group is targeting advisers when so may other industries need scrutinising. Really the gov’t can’t legislate professionalism – it can only come from individual practitioners wanting to act ethically and that can mean treating colleagues with respect, not shafting them in order to write business.
FoFA seems to have achieved nothing and overall has been a useless waste of time, effort and taxpayers funds.
Just a little query – If a real estate salesman sells a home to a client, then finds a better one for them, then finds a better one again – sells them three homes in a year plus the ones they owned, does RESI limit their commission?? I thought that’s what we had SOA’s for – to show a reasonable basis for our sale. Presumably SOA’s will now become redundant.
Merv Gay makes an intersting point. Yes, this churning thing is different from FoFA, but nevertheless it’s on the radar. What about doctors requiring patients to attend their surgeries (and getting their fee for it) to have repeat scripts updated? Will they be targeted for this practice next – I don’t think so.
Jeremy Wright says “It would be good if the GOvernment asked our people what they think,” and I agree 100%. The reason the Government DON’T ask our clients what they think is because they are frightened of the response. Wannabee Chairman Shorten KNOWS our clients will say to him what they are already saying to me “For God’s sake leave the system alone.” People understand commission, the amount of fees and trails is clearly on their statements – new commissions are on the SOA. What more do our clients want? NOTHING except trust and understanding from us which they have had (in my case) for forty years. WOULD SOMEONE PLEASE STAND UP AND SHOW ME ANY POLITICIAN WHO HAS THE TRUST OF THE PEOPLE FOR FORTY YEARS – PLEASE – PLEASE. I REST MY CASE!!!!
Hi Guys & Gals, let’s just take a breather! The bickering between the AFA & FPA has done us no favours (divide & conquer ?), however, the deal that the FPA seems to have done with the Gov’t & ISN without consultation to the rest of the industry smacks of opportunism !! I wished they’d held their nerve & not caved in to Self Interest!! However, I’m confident that the AFA (of which I’m a member) will be able to comply with the ASIC requirements under their “Code of Practice”. But let’s not forget there’s an election next year, we should now focus on the real enemies of Australian small business, Labor, the Independants & the Greens !!! BUT, we must also hold the Opposition to account WHEN they gain power to ensure they stand by the commitments they’ve given to the industry to repeal the biased, unfair & unworkable sections of the legislation. I’ll declare my hand, I’m not a finacial planner & have no intention of being one, it’s not the path I’ve taken.! I’m a proud risk advisor & have been for 23 years, I’ve always had my clients interests at heart, as do many other advisor’s & Financial Planners ! At the end of the day the vast majority of us ALL have the same integrity & moral fibre, whether you are AFA & FPA !! Call me a dreamer, but I’m hopeful we can carry the fight to 2013 & get the best outcome for our cients, our business’s & ouselves. This battle isn’t over yet !!!
Jeremy Wright and Merv Gay you are so right. Clients look to their advisor to be available when help is needed.They expect professional advice and this is what we are all about. They are not concerned about signing a bit of paper to opt in or if they are to pay, they want HELP and need it now. No squabble or how do we pay. It is all in the Statement of Advice they have previously received. Over 20 years experience have proved this.
Been reading over all the above with interest, and agree with MarkL about the’divide & conquer’ saying he mentions… much as I hate to say it, perhaps the FPA & AFA could learn from all the various industry super’s about joining forces to defeat a common enemy…
also agree in part about CFP18’s comments –
Simon – haveto ask, why would CFP18 ‘hand back in’ his CFP? Does a uni ask you to hand back your MBA if you don’t remain a student there? obviously CFP18 has earned a certain designation & should have some ability to keep a qualification & ongoing recognition in place (assuming CPD points are met) that isn’t tied to being forced into membership. One of the reasons I chose to go down the ‘Masters’ course route instead of CFP.
Comments are closed.