The Financial Services Council (FSC) has called for financial advice to be tax deductible, and warned against the “unintended consequences” of some of the proposed FoFA reforms.
The FSC articulated its position on the proposed FoFA reforms at a function in Sydney last week, where its CEO John Brogden said: “It would be an unfortunate outcome of these reforms if the move to fee for service resulted in higher advice costs for consumers.”
“Today, the cost of financial advice can be tax deductible if it is paid for on an ongoing basis, but not if advice is paid for on an up-front basis. With the move to fee for service Australians who choose to pay for their advice upfront will be disadvantaged.”
Mr Brogden outlined the FSC’s position on what it identified as the key issues arising from the FoFA reforms. In summary, the FSC:
- Supports the introduction of fiduciary duty
- Supports the abolition of commissions (excluding risk insurance products)
- Does not support “opt-in” and the current proposal around expanded intra-fund advice
On the issue of volume payments the FSC is both for and against, indicating that while most volume payments are not in the best interest of consumers, not all volume bonuses should be abolished.
Among those payments that are acceptable to the FSC are those that are passed on to the consumer in the form of a rebate, and payments made to dealer groups from fund managers as long as the individual adviser is not aware of the exact amount.
A blanket ban simply assumes that all volume related payments are evil
“A blanket ban simply assumes that all volume related payments are evil and in doing so sacrifices genuine savings currently enjoyed by consumers,” Mr Brogden said.
Overall, the FSC is in favour of the intent of the reforms, but it says they should be viewed as a “package” rather than “a collection of individual measures”.
“The Financial Services reform agenda provides our industry with a once-in-a-generation opportunity to re-establish, and in some cases establish for the first time, a relationship of trust with consumers,” Mr Brogden said.
“The reforms will have a significant impact on the structure of the industry and the competitive landscape. It is therefore critical that the Government assess the combined impact of the measures rather than consider each on a stand-alone basis.”
