Senior Treasury officials speaking at the 2010 AFA National Conference have clarified and re-stated for advisers the current status of two key FoFA reform proposals, namely risk commissions and client opt-in requirements.
The two officials responsible for managing the industry conslutation process on Future of Financial Advice (FoFA) reform proposals, Geoff Miller and Dr Richard Sandlant, positioned all their comments to advisers at the Conference within the two guiding principles of the reform process:
- The FoFA reform proposals are about ensuring the best interests of the client are observed at all times and ensuring that the system removes any distortions that may block with that process
- Increase the availability of financial advice to those who need it most
Within this framework, the officials acknowledged that adviser commissions paid on investment and superannuation advice are on target to be removed from 1 July 2012.
… it is important that the question of risk commissions be considered separately
However, Mr Miller acknowledged previous statements made during the consultation process that risk commissions are not yet part of the committee’s proposals, and that it was important that the question of risk commissions be considered separately because of the different nature of the service and the implications that may be associated with banning commissions.
As it has previously stated, The Treasury will be considering the question of the future of risk commissions in early 2011. Mr Miller also confirmed to the audience that whatever that final decision will be, it will be included in the final package of reforms that will mostly apply from 1 July 2012.
In his address, Dr Sandlant also raised the issue of volume payments, stating that there were perhaps some circumstances, depending on the nature of the incentives, that may not be in conflict with the guiding principles of the reform process.
On the subject of how client ‘opt-in’ permissions may apply under FoFA reform proposals, Mr Miller made it clear that the Government had decided on opt-in and it was more so a matter of exploring the detail of how this process will work.
A question to the Treasury officials asked about why, instead of the difficulty associated with opt-in provisions, there should not instead be a process that involves clients opting out. The Treasury response was simply that the Government had already decided it was to be opt-in, and this was to be the focus of the Treasury Committee in its considerations prior to submitting draft legislation for comment.
The mood of this meeting, while discussing subjects that have generated much debate and passion, was that it was important for advisers and the financial services industry to work in concert with the Government and their officials to achieve the best outcome for Australian consumers which, it seemed to be acknowledged, was a mutually-held goal.
