The first Bill to enact the Future of Financial Advice (FoFA) reforms was introduced into Parliament last week, but the content differed significantly from the original Exposure Draft that was released for consultation in August.
The most significant differences between the Exposure Draft (Tranche 1) and the Corporations Amendment (Future of Financial Advice) Bill 2011 were the omission of the best interest duty statute and the inclusion of a new retrospective disclosure requirement.
Despite widespread industry support for the best interest provision, the ten pages devoted to establishing this element contained in the Exposure Draft have been removed from the Bill.
The single biggest reform recommended by the Ripoll Inquiry has mysteriously disappeared from the legislation introduced into Parliament today
In a statement responding to the release of the Bill, Shadow Minister for Financial Services and Superannuation, Mathias Cormann, said: “The single biggest reform recommended by the Ripoll Inquiry, the introduction of a statutory best interest duty for financial advisers, has mysteriously disappeared from the legislation Bill Shorten introduced into Parliament today.”
In addition, a requirement for all existing clients to receive a fee disclosure statement has been added to the controversial opt-in policy.
The Association of Financial Advisers (AFA) says it believes the legislation is all about political expediency. AFA President, Brad Fox, said the introduction, without warning, of an additional obligation on advisers at this late stage further demonstrates the Government’s allegiance with industry funds.
“At an Industry Super Network function on 27 September, 2011, the Prime Minister addressed members of the audience as ‘comrades’ and openly thanked them. In her address, she said, ‘You stood with us to secure the iconic opt-in policy…’ Her statement reinforces our belief that opt-in is Government payback for ISN’s political support – nothing more, nothing less,” said Mr Fox.
The Financial Planning Association (FPA) has announced that it will not support the Bill as it currently stands, because of the inclusion of opt-in, and the amendments which it says have been made without consultation or support from advisers.
“We are disappointed with how the legislation has been drafted and by the amendments made to FoFA Tranche 1 and do not support this Bill as it currently stands,” said FPA CEO, Mark Rantall.
“The FPA has held many open conversations with Government outlining where our members stand in relation to opt-In and FoFA in general and how it will affect consumers.
“It is our concern that should a consumer not sign an advice renewal certificate, they could be left without financial advice at their most vulnerable time – for example, pre-retirement and when markets are volatile. This kind of legislation is not in place anywhere else in the world. Further, it is redundant if ‘best interest’ and a ban on conflicted remuneration is introduced.”
