The Senate Economics Committee (SEC) review into the Future of Financial Advice (FoFA) Bills has recommended no significant changes to the legislation.
Mirroring the recommendations of the Parliamentary Joint Committee on Corporations and Financial Services (PJC) review into the same legislation, the SEC report sets out ten items that it has asked to be addressed prior to the Senate passing the Bills.
Key observations made by the Committee include:
- That the annual fee disclosure statement and opt-in provisions are necessary reforms that will increase transparency and improve consumer choice
- That the opt-in requirements will not add a significant administrative burden to a financial adviser already in regular contact with a client. The committee does, however, agree that in the interest of transparency, it would be helpful if the government could release the cost-benefit analysis, including those elements included in coming to a conclusion about the final cost.
- That the Best Interest duty is a necessary and overdue reform and that, while it draws the attention of Treasury to industry concerns that in its current form the duty may prevent the provision of scaled advice, the Committee has not made any specific recommendations to change the duty
- That a review of insurance offerings within superannuation is required post implementation, with the review to consider tailored advice provided on group insurance inside super and the efficiencies for fund managers and discounted rates made available to consumers on group life policies
The SEC also made no recommendation to push-back the implementation timeline, however the report noted: ‘…that it is not unreasonable for institutions facing substantial system changes to be given some leeway in implementing the reforms and that the ‘facilitative approach’ proposed by ASIC would be appropriate in the first year of operation.’
Once again, the Coalition has expressed an alternative view of the reforms, with SEC Coalition Senators submitting a dissenting report.
The dissenting report is almost identical to that issued by the Coalition members of the PJC, and calls on all Opposition Senators not to pass the FoFA Bills unless the recommended amendments are made.
The FoFA Bills are currently awaiting further debate in the House of Representatives.
