Small business has been caught in the political cross-fire, and independent advice practices and clients will suffer the most from the recent changes to the Future of Financial Advice regime, the industry’s key associations have warned.
Industry bodies were quick to respond to last week’s Senate action, which led to the disallowance of the Government’s FoFA amendment regulations (see: Senate Takes Axe to FoFA Amendments).
Association of Financial Advisers (AFA) CEO, Brad Fox, said he was disappointed that FoFA had become a political football.
“In aggregate, those who will suffer most from this disallowance are the small-business financial advice practices and their clients. Ironically, this is where the majority of personal financial advice is provided in Australia. It is disappointing to see small business caught in the crossfire again,” Mr Fox said.
The Financial Planning Association (FPA) also condemned the disallowance motion, saying it would have a catastrophic effect across the entirety of the financial services industry.
“Clearly we’re bitterly disappointed that this eleventh-hour change of heart has sent the industry into chaos and scrambling for solutions,” said FPA CEO, Mark Rantall.
“ASIC have come out and said they will take a facilitative approach and they needed to do that because a transition period was not allowed for in the decisions that were made (on 19 November).
“As we sit here today, advisers will be in breach of the law, just with the stroke of a pen. People need time to be able to comply, and you need to put systems and processes in place to ensure that happens. Yes, there will be people who are not impacted, but that’s not necessarily the majority.”
Those who will suffer most from this disallowance are the small-business financial advice practices and their clients
Both the FPA and AFA’s leaders said they expected it would be some time before the dust finally settles on FoFA, with the Senate still due to debate the Government’s FoFA amendments legislation, and Senator Mathias Cormann indicating he would pursue improvements to the regime (see: We’re Not Giving Up on FoFA Amendents).
“The best we can hope for now is a negotiation and sensible outcomes,” Mr Rantall said.
“Any other amendments that we would hope to entertain support on would need to be politically pleasant, not just policy pragmatic,” Mr Fox added.
Among the issues the Associations will now have to work through is whether to proceed down the path of implementing an ASIC approved Code of Conduct which obviates the need for opt-in. Mr Rantall said the FPA would push forward with ASIC to have its Code of Professional Practice approved, a process that was already underway prior to the change of Government last year.
Mr Fox said that while the AFA had always maintained some concerns that the approval of a Code of Conduct by ASIC would have been a way to obviate the need to meet the law, which did not necessarily fit with the operation of a profession, the AFA would once more examine its options.
“We’ve been working on our Code of Conduct over the last 18 months. We’ve taken our time with that, because so many of the issues around financial advice have continued to be up in the air. That is work that we’ll finish in the near future, and it would be likely that we would look for a way to support our members to bring as much efficiency as possible into their business. And if that means going for an ASIC endorsed Code, with respect to opt-in, then we could do that.”
Both Associations were also in agreement about the need to proceed with an enhanced register of financial advisers.
This eleventh-hour change of heart has sent the industry into chaos and scrambling for solutions
Mr Fox said: “We haven’t seen anything from the Government with regard the adviser register. It would be our view that it is well progressed and it would be useful for consumers just to check that the person they’re meeting with is appropriately qualified.”
Mr Rantall added that the FPA had included the introduction of an enhanced adviser register within its 10-Point Plan for an improved financial advice framework (see: FPA Releases 10-Point Plan…). “We’d be quite disappointed if we saw that become a victim to the political play that’s happened around FoFA. The adviser register is an important consumer protection measure and it had wide industry support as well. We’re hoping it doesn’t become a casualty.”
Also weighing in on the latest twist in the FoFA debate were the Financial Services Council (FSC) and Industry Super Australia (ISA).
In a statement issued prior to the Senate vote, outgoing Financial Services Council (FSC) CEO, John Brogden, said the disallowance would cause havoc for consumers and financial advice providers.
“This disallowance motion will create a legal quagmire that will lead to disruption and unnecessary costs and will reduce affordability and accessibility of financial advice.
“Overturning the FoFA regulations at the eleventh hour will do more harm than good,” Mr Brogden said.
He argued that the FoFA laws had never been watered down, as argued by the Opposition and Independent Senator, Nick Xenophon, and that the Senate had not considered the market impacts of its decision to vote down the regulations.
“The industry has been working under the current FoFA arrangements since 1 July. To turn around and just throw them out is irresponsible,” he said.
In contrast, ISA Chief Executive, David Whitely, applauded the Senate’s move, labelling the disallowance a ‘win for consumers’.
“Australians want and deserve financial advice that is unequivocally in their best interests and free of sales incentives.
“This is now an opportunity for the financial services industry to build consensus around the regulation of financial advice to safeguard the $1.6 trillion Australians have in our superannuation system.
“This is an opportunity to repair and rebuild the professional standing of financial planners. It is an opportunity to create certainty for the financial services industry, and consumers,” Mr Whitely said.
No!! Mr Whitely, it’s not a ‘win for consumers, it’s a win for the ISA and the Union movement.
How stupid are we as nation when self interested lunatics in the Labour Party, the Greens, and nut jobs like Lambie and Muir can dictate to a government who were overwhelmingly voted in by the majority of Australians to fix the mess most of these people created in the first place.
You have got to admire the gaul of Whitely.The self righteous self nominated white night of our industry ?? Whitely your lies,distortion of truths, misguided attacks on the majority of advisers that serve the community so well define you and the industry (union) fund movement. Your hypocrisy is seen in your views on the governance of industry super funds, default fund allocation,you refusal to accept unitised pricing to create transparency in investment return reporting and carve outs of legislation to enable the flogging of industry funds without consumer protection.
You have single handedly divided this industry into two camps:
1. Those that advise clients and maintain ongoing trusted relationships.
2. Institutions that flog product.
You represent category 2 buddy. No more no less.
Jason
love your comments
in particular… self righteous
lies — par for the course for anyone associated with labor and unions at the moment
what was the name of that fund that gave member names out to the union
fancy legislating all those years ago that all super money for a union member had to go to that members union
and fancy unions being shareholders of industry funds and as such enjoy dividends….. does that mean that the more funds under management , the more divs are paid out?…. now if all of this is true, where do those divs go after hitting the union pockets… off to the labor party perchance …. and so the virtuous circle is completed … but I am not so sure it can really be called “virtuous”
but, he is a clever boy by making such global remarks… who would not want all that he is prattling on about ?
Yesterday I was notified that a client had rolled over her super account to a new employer’s arrangement, which I didn’t see as a big issue. This was done without an SoA, benefits gained or lost, cost comparisons, insurance gained or lost etc. I don’t think on this occasion that the client will be disadvantaged, but nor will she be necessarily better off. How come I have to go into the in and outs of a duck’s bum to swap a super account and others don’t? I’d like to see the playing field made level for all, not just onerous for some.
I’m assuming that David Whitely, Choice and the other member’s of the ‘Coalition of Crack Pots’ will now support measures that apply to the WHOLE financial services industry – including opt-in and Fee Disclosure Statements for Industry Super funds?
I mean, if you are genuinely concerned with consumer protection, don’t all Australians have a right to know how their super fund spends their money (e.g. Trustee remuneration, massive advertising campaigns and intra-fund advice they pay for but never receive)?
Oh, wait, that only applies to the non-Industry Super Fund sector.
George Orwell summed it up best – all funds (animals) are equal, but some are more equal than others!!
Without a doubt the previous comments are all valid to some extent and by the Jason the Fund in question was C Bus and if you follow the court case purgery is on the table for two of its administators who have blantently lied about their participation in outright privacy negligence. Why doesn’t the ABC or Four Corners air this story. ?? I think we all have a pretty good idea that it wont do their “Pals” in the industry any favours ??
Level playing field ?? Really what a joke!!!
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