Senate Takes Axe to FoFA Amendments

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The Government’s Future of Financial Advice amendment regulations, which remove opt-in and the catch-all clause from the best interests duty, have been disallowed by the Senate.

Senator Jacqui Lambie
Senator Jacqui Lambie

In a surprise development overnight, Palmer United Party (PUP) Senator, Jacqui Lambie, and Australian Motoring Enthusiasts Senator, Ricky Muir, added their support to an Opposition-led motion to disallow the FoFA regulations.

The disallowance motion was put to a vote in the Senate today, and was passed 32 to 30. The FoFA regulations have now been disallowed, meaning the Government’s amendments to the FoFA legislation have been removed.

The elements of the legislation that are impacted include:

  • Grandfathering – the regulations addressed concerns that financial advisers could not switch licensees without losing grandfathered commissions
  • Opt-in – the requirement to have clients resign with their adviser every two years has been reinstated
  • Retrospective Fee Disclosure Statements (FDS) – the requirement to issue an FDS to existing clients has been reinstated
  • Best interests duty – the final, catch-all step in the best interests duty ‘safe harbour’ steps remains in place

This was the third time a motion to disallow the FoFA regulations had been put to the Senate. Previously, Senator Mathias Cormann reached an agreement with Clive Palmer, securing his party’s Senate votes, along with that of Senator Muir, to retain the regulations (see: Palmer Deal…). However, Senators Lambie and Muir changed their position on FoFA and added their names to the latest FoFA regulations disallowance motion.

The disallowance motion was lodged on 18 November, and scheduled for debate on 27 November 2014. However, the Labor party then called on the Senate to suspend Standing Orders to bring forward the debate on the motion to 19 November.

The Government’s FoFA amendment legislation is still awaiting debate in the Senate, but if voting follows current patterns, it is unlikely to be passed.



26 COMMENTS

  1. Does anyone know a subway franchise for sale?? I have never seen a bigger grab for power over anything in my life? There is no need for this ^>~#£it It appears some senators wheel they power like the evil queen in the 7 dwarfs if we don’t get what we want we will squeal like a spoilt child until we do

    Talk about over regulation I ask the question who really wins at this the consumer or the big banks that own most insurers and of course the insurers themselves who don’t have to pay if someone does not opt in
    It is such a sorry day for those of us who try to make a difference to our clients financial health and life options who have formany years worked on our businesses as a retirement option ?
    Let’s all talk to a computer or a sales person who cannot give you advice! Work it out yourself
    Oh dear !!whats next!???
    Where to from here I wonder???!

  2. What a joke we are becoming a political football FPA time to really step up and work against these in professional politicians Jacquie Lambie you are a goose

  3. So, the lunatics have the keys…..perhaps those that most needed affordable advice have now been massively & inadvertently impacted to their detriment?? Then again a system that allows the representation of the Australian Motoring Enthusiasts & a Nation that empowers them to hold the country to ransom along with this poor disaffected woman maybe deserves all that they get – what a disgrace!!!!

  4. It is appalling that these 2 senators, who have displayed nothing but ignorance, and in one persons case generally abysmal personal behaviour, should vote on a bill that makes the running of a small business so costly and POTENTIALLY punitive, beyond any other like industry in the WORLD!
    A pox on the system that elects such fools and specifically a pox on a senate system that gives the states the same number of senators whatever their population size might be …. is this topic “state sensitive”.

  5. This is ludicrous! A gun party and a mining party: minority parties who have no idea what the financial services industry does other than the rubbish written about t by left wing journalists so they vote down sensible legislation for emotional reasons.

  6. Let’s boycott FoFA!!!!!!! If every adviser ignored the ignorantly onerous demands, we could concentrate on helping clients and move forward…..I’m serious about the boycott.

  7. Who will benefit from this?….. Industry funds, institutions??? Where do the inbuilt trails go if people don’t opt in?

    Get the soft underbelly !
    Yet serious changes to the disaster that our indigenous folk are living through are too hard to even contemplate ….

    Shame on all them who voted these amendments down …. Each of them must clearly articulate their reasoning!

    As I said , shame on them!

    • All good points John. If they are really serious about reform the politicians should have the guts to:

      1. Call on the Federal Government to formally separate the provision of financial advice from the ownership of investment managers or administration platforms within 3 years.

      2. Ban all commissions paid in the financial and insurance product distribution channel within 1 year. This includes shelf space fees, training allowances and fees paid to product providers (including retail and industry super funds) for distributing products.

      3. Disclosure of remuneration arrangements by employees of financial product and administration platform providers where remuneration is linked to quantum of products sold to the general public.

      4. Banning of conflicted ownership arrangements between platform platforms providers and investment management companies within 3 years.

      5. Banning of conflicted board relationships between superannuation funds and investment management companies within 1 year.

      Come on FPA. Come on AFA. Come on all Financial Planners. Let’s get on the front foot. We are the cleanest part of the industry now and we should be holding everyone else to the standards we have to live by.

  8. So I guess now Ricky , the motor car driver, knows what “balance of power” means at last … And our taxes are to be used to pay these peoples salaries for another 5 years???
    How ironic

    By the way , where are the people who supposedly represent us? You know the ones ….the fpa and afa

    They knew this vote was in the pipeline at some stage…. Haven’t they been briefing these two ??? Just in case?

  9. Time for some well justified civil disobedience. If our livelihoods can be decided upon by a bunch of uneducated morons then let’s treat their decisions with the same respect they give us. Give the unions, who are behind all this anyway, a taste of their own medicine by simply refusing to abide. Might need some institutions and associations to show some balls but it can be done. Jacqie Lambie has a spat with Ckuve Pslmer and we have to pay the price? What sort of democracy is that. It’s s f&&&ing embarrasment, that’s what it is. And not one single member of the Labour Party thinks differently.

  10. Well it’s back to square one.
    I suppose they senate thinks that by voting these changes is helping the average Joe. What it has done is increase the cost of financial advice and will mean the loss of jobs and small business’s will just shut up shop and walk away.
    The FPA shold hang their head in shame, they are nothing but a bunch of self serving quislings.
    I am calling on all FPA members to resign and join the AFA, who at least have been fighting for the benefit of all financial advisers.
    Maybe it’s time to emigrate.

    • Great point, do these senators know or even understand the implications of the legislation without these changes will be an enormous cost to the Financial Advisers and Planners who are providing excellent ongoing advice and service to Australians.
      Also what a joke that a minority group can have “Balance of Power” for Australians. Maybe we need to rethink the way our system works, the financial industry could begin lobbying for changes to constitution to overall our political system to rid the minority groups!

  11. Now the dust has settled, its time for a few home truths.

    This was always going to be a debate for hearts and minds of an ill-informed public between industry funds (desperately trying to protect their patch after Howards super choice legislation )and our “mates “the big banks. The ISN sought to attack & slow up advisers with legislation from a friendly Government. Slow up advisers footwork and you slow up the outflow of funds. Make them charge fees while the ISN provide a “free “service. It all helps, especially when you have run an un-challenged “Compare the Pair “campaign for years.

    The ISN beat us hands down in the strategy war. They sold the mainstream media on why these controls were needed and were never questioned in that media as to their real objectives. They fed a friendly ASIC with cases where advisers were supposedly un-ethical

    I’ve lived in Canberra over 4 decades and I have lived cheek by jowl with politicians and public servants. I have seen many successful & un-successful lobbying campaigns over the years, with friendly and un-friendly governments

    The advice and funds management industry have a natural affiliation with conservative governments but in this case we were seduced by that close relationship.

    Smart voters know in their hearts that politicians will say anything to anyone who badgers them just to get elected. They will make promises to anyone, friend or foe. Whether those promises can ever be delivered does not matter.

    We took the promises of Hockey & Cormann at face value, and sat on our hands and did not run a public campaign against a vociferous and media savvy ISN. We, including professional lobbyists I met at the time, thought that was un-necessary, it could all be done from the inside. The industry even ignored Hockey’s form, forgetting he had failed to include the changes he had promised ( because of a Ministerial promotion ) as the legislation was drafted leading to the 2004 changes.

    For Gods sake no one apparently studied our parliamentary system. Very few governments ever control the Senate, and the last time it occurred, it lead to ego-driven changes which Howard now regrets. We listened to the lobbyists, who of course told us what we wanted to hear.

    The banks were always on the horse called Self-Interest, while we, the advisers, relied on the FPA and the AFA

    Both failed us in the process. Both relied on carefully worded “undertakings ” by Cormann and others on what we could expect from a conservative government. Knowing the system, I warned my AFA that we should not rely solely on Abbot & Coy to deliver but no person wanted to listen to my warning.

    We needed to counteract the ISN in the real public space as well, to shore up our position in the real media.

    Needless to stay, the activities of Storm & CBA did not help, but if the campaign was well in place before then we might have had a chance. Its PR 101 !

    The AFA, I believe, collected some money for a campaign, but the campaign did not happen.

    Now advisers have joined the long list of interest groups deserted in their hour of need by Governments, being seduced along the way by an un-deliverable political promise. Its not just us – the sugar producers of Australia have a right to be GUTTED after all the promises by “friendly ” government failed to provide tariff-free access to China

    The AFA & FPA should never, ever, rely solely on “behind closed doors ” assurances, promises and sympathetic noises from politicians, of either persuasion. Politicians act if votes can be proven to be involved, and that means a “hearts and minds ” campaign is needed. Politics 101 .

    A media savvy ISN has won this issue hands-down. We must learn this lesson , but I am not confident it will occur.

    • @Billb – you are spot on. The issue we have is, that our Dealer Groups, the FPA and AFA will never deign to “stoop” to the level of fighting it out in the media. They should do and I have gritted my teeth whenever I’ve seen the advts comparing an Industry Fund with a Public offer one. Nothing about returns or where invested of course!

  12. I can understand how being faced with real people who have lost their life savings from shonky advice can tear at the heart strings, where they have been hoodwinked into buying investments which did not suit their situation. Many were just greedy investors though. The advisers are being dealt with – ASIC should ensure such remuneration incentives no longer exist.

    I can understand how they feel they’re doing the right thing. We cannot blame them for having a conscious.

    However, Lambie and Muir should have sat with advisers to see how the changes will be administered and be educated about the increase cost of advice and whether the outcome is really a plus for ordinary consumers.

    I fear that now these vulnerable gullible senators have been swayed by the veteran greens and independents on this issue, only time will tell what else they are swayed on – goodbye to any meaningful reforms in this term and the next!! Political pawns for the next 5 1/2 years. Nick X could hardly contain himself behind his smirk last night on lateline when asked this very question by the $660kpa man Tony.

    The senate does not work, it represents the minority – it’s supposed to be the house of review not the house of complete control.

    • The above replies are well and good. But we are conversing with each other. We need to be telling our story to the media, who fuel this garbage. The media make us ALL out to be rich greedy and uncaring. In reality that is totally not the case. Someone has to front the media as a united non FPA AFA block.

  13. Unfortunately the disgraceful actions of a few, have tarnished the rest of the honest, hard working majority and our representatives who have worked behind the scenes, maybe were a bit naïve about the dirty tactics that Labour would pull out of the hat to get their way to grab control.
    The first casualty in these debates and discussions is always the truth when dealing with self interest groups and the Labour party is the biggest self interest group.

    The KISS principle still applies today when talking to politicians, as even though our concerns seem huge to us and the solution is a simple fix, we forget that politicians have no understanding of what we do and how we do it and they have hundreds of other important things outside our industry to consider and unless we articulate the problem and solution in simple language, they will become confused and start to believe the media.

  14. Some good points have been discussed, though I disagree with Bill M regarding Insurance commissions being banned.

    It is one thing for a client to pay for Investment advice, which I agree with, though the mistake many people outside our industry make, is the belief that Insurance is a easy to setup and administer structure, which clearly it is not.

    Insurance Companies and the regulators have made the purchase of Life Insurance products, a time consuming, expensive process and clients will not pay for the time it takes for us to implement and comply, let alone the many hours spent chasing and fixing stuffups, helping clients with onerous paperwork, claims etc.

    In order for a person to agree to pay a fee, they have to first, be interested enough and second, see value and I can tell you after 27 years of advising, I am yet to see one person who would pay a fraction of what it costs to provide professional Insurance advice.

    • I agree Jeremy. Commissions are not the issue, even with investments in my opinion. Any supposed bias can simply be removed by standardising the rate and remove all over-riders etc. A very obvious and simple fix in my opinion. Commission on initial sales is just an expense to the company to market a product.
      Industry funds are able to outlay mega millions on blanket media advertising, sports sponsorship, trade union sponsorship, funding the ISN and subsidising financial advice to some members – and no-one questions where this money comes from! Why don’t they outlaw all those things and give their members higher returns?

  15. No one has mentioned the fact that Lambie publicly stated last week that she will simply vote against the government on any issue until she gets her way on the soldiers pay-rise. All this crap about her re-considering her vote on FOFA after hearing more evidence is just another lie. Nick and his cohort of loonies simply jumped at that opportunity and arranged for a new vote. What sort of system allows a senator with a grief to hold an industry to ransom? Maybe the libs simply state they will commence drafting completely new legislation and take 5 and a half years to do it!

  16. Looking through history, Bad laws lead to “boycott” & “well justified civil disobedience”.

    I’m all for an immediate boycott and apply common sense to doing the best by my client!

    FoFA , even with the proposed improvements, does not work! Clients are baffled by 40-100 page SOA’s, Small clients are being priced out of service, over focus on fees rather than value, hysteria over commissions (but this is a model that works). FoFA seems to have been designed by bureaucrats and vested parties that have no bloody idea!

    It wouldn’t take much for a small group of experienced advisers to redesign this industry to work for all parties- especially clients.

    Opt in would be DISASTROUS for both clients and the industry!!

  17. I have looked at all aspects of these two morons why don’t we put up a candidate in the seats that they hold hopefully get them voted out in the next election show them we mean business let them and any other fool out there get what is coming to them .we don’t need this grieve leave us alone we all do a great service for our clients

  18. Will either Jacqui Lambie or Ricky Muir publicly reveal whether they have a Financial Adviser and if so, would they provide their opinion on the level of advice, service and value they receive from THEIR adviser.?
    If they do have an adviser and if that person is listening,I think you could make a stand and publicly dis-own yourself from these 2 clowns and in doing so, show your disgust at their abhorrent tactics.
    If you are their adviser and do not divorce them from the relationship, your principles are questionable.
    Unfortunately, I doubt whether either of them have a Financial Adviser, because big words would only serve to confuse them and signing their name in crayon wouldn’t be acceptable.

  19. These senators are like children driving motor vehicles, bloody dangerous. Unfortunately to quote Bill Shorten when he was Finance Minister “No one ever lost office by making life hard for financial planners”. With this type of disregard for the profession and the financial services consumer it is no wonder we are in the situation we are in today. As a lobby group we currently don’t have the influence required to change this draconian legislation and we need to find a way to have a stronger voice, for the sake of all Australians trying to better their position.

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