Financial Services Minister Bill Shorten has indicated he is reconsidering whether the annual fee disclosure requirement, introduced in the first tranche of the Future of Financial Advice (FoFA) reforms, will be applied retrospectively.
The Minister, who was speaking at the Financial Planning Association’s (FPA) National Conference in Brisbane, said he was “listening very carefully” to calls for the disclosure requirement to be limited to new clients only. (See: FoFA Bill Omits Best Interest, Adds Disclosure)
Mr Shorten said it had been made clear to him that the Government needs to be very careful about the form and complexity of the intended requirement for annual fee disclosure: “Simplicity is much to be preferred over some great detail which would radically increase your costs of business,” said the Minister, as he acknowledged many financial advisers already have existing disclosure practices which will satisfy those requirements: “… we don’t want you to have to reinvent the wheel,” he said.
“The issue which I’m listening very carefully to is that perhaps we should also not make that retrospective. So if you’ve got your existing clients, they’re under existing arrangements and it should be new clients to whom that applies. I’m listening very carefully to that.
“And the major reason I’m listening to it is because of the FPA and certain Government Independent members, who’ve said: ‘Alright, if we’re going to have this, let’s make sure the idea works’ and if we’re going to get people to change some of their business model, let’s not do it in such a way where it includes massive retrospective costs on people who, in good faith engaged in one business model, are now being asked to look at a new approach.”
Minister Shorten also provided some clarification regarding other elements of the FoFA reforms:
- The Bill representing the second tranche of legislation, including volume bonuses, conflicted remuneration and best interest, would hopefully be introduced into Parliament before the end of this Parliamentary year
- A discussion paper on enshrining the term ‘financial planner’ in law would be released by the end of 2011
- The changes to the accountants exemption and the SMSF sector would not be likely to appear before Parliament prior to the Autumn session in 2012
In his address to the FPA Conference, the Minister acknowledged the role the FPA had played in influencing the Government’s financial advice policy.
“I’m indebted … to the work the FPA does… There’s no doubt in my mind that as we go through the various propositions in FoFA and MySuper, that the FPA has given me the most influential counsel of any that I’ve received in a lot of the issues.”
The Minister called on financial planners to embrace change within the context of a changing society, remarking that he was confident that most of the reforms would pass Parliament, and that this would result in more Australians seeking financial advice.
