Which FoFA Amendments Will Deliver Greatest Benefit?

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Which of the proposed FoFA amendments will deliver the most positive outcome for your advice business?
  • Removal of opt-in (29%)
  • Removal of retrospective annual fee disclosure (26%)
  • Amendments to grandfathering provisions (16%)
  • Removal of best interests 'catch-all' provision (13%)
  • Scaled advice clarification (10%)
  • Broader access to risk commissions in super (7%)

The announcement of the Federal Government’s proposed amendments to the FoFA legislation have generally been welcomed by most elements of the financial services industry. But which of the proposed changes will have the greatest impact on your advice practice and your clients?

While we aren’t making the assumption that the proposed changes will have a positive impact for the industry, we are nonetheless adopting a ‘glass-half-full’ approach to our latest poll, which asks you to consider which of the proposed amendments will deliver the greatest benefit to your business and to the clients you serve.

We have selected six of the most significant proposed amendments, and have briefly outlined below the Government’s rationale for those changes, taken from the attachment to its 20 December 2013 announcement:

  • Opt-in: Remove the opt-in requirement so that advisers no longer need to seek their client’s agreement every two years.
  • Annual fee disclosure: Remove the retrospective application of the fee disclosure requirement, so that advisers will not need to provide fee disclosure statements to clients who entered into a fee arrangement before the mandatory 1 July 2013 commencement date of FoFA.
  • Best interests duty ‘catch-all’: Remove the catch-all provision (S961B(2)(g)) so that advisers can be certain they have satisfied their obligations under the best interests duty.
  • Scaled advice: Clients and advisers will be explicitly allowed to agree on the scope of financial advice to be provided, whilst ensuring advice is still appropriate for the client.
  • Life insurance inside super: The ban on conflicted remuneration will only apply to commissions on risk (life) insurance products inside superannuation in circumstances where no personal financial advice about these products has been provided i.e. where automatic coverage is provided inside a default (MySuper) superannuation fund.
  • Grandfathering: Amend the existing grandfathering provisions, that exempt certain benefits under pre-existing arrangements from the ban on conflicted remuneration, to allow advisers to move between licensees and to continue to access grandfathered benefits in certain circumstances.  Amendments will also be made to clarify the operation of the grandfathering arrangements with respect to the sale of financial planning businesses… and employed advisers becoming self-employed advisers.

riskinfo will monitor progress of the proposed amendments over the coming months as they are steered through the parliamentary process, and we will publish further clarification around a number of the proposals, including how the easing of conflicted remuneration bans inside the superannuation environment will be applied.  But in the meantime, cast your vote for the proposed amendment that will deliver the best outcome for your business and for your clients…

 



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2 COMMENTS

  1. While all these changes are very welcome, I do wonder why the Fee Disclosure Statement has not been abolished completely? It is just replication of information already disclosed to clients in the SoA and other ongoing client statements. It ultimately leads to greater costs and confusion for most clients.

    I realise the Libs never said they would abolish it as part of their FOFA amendments, but they did make a broader election commitment to abolishing business red tape that unnecessarily increases costs & complexity. Surely the FDS is a classic example of unnecessary red tape that should be abolished completely.

  2. My expectation is that this survey will overwhelmingly indicate removal of the opt-in provision is the most welcome alteration. This means that the value of the rest of the survey will be diluted.
    It is disappointing that the survey author/s did not see fit to broaden the context by the use of numbered preferences or at the very least request up to (say) 3 multiple selections so that the most welcomed second, third and beyond preferences could be more accurately assessed.
    While Opt-in is the most insidious element of FoFA for my practice, the annual fee disclosure is a significant cost imposition. All other proposed changes will effect all of us and the anticipated alterations most welcome but the nature of the survey does not permit us to accurately grade anything but the top one or two provisions.

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