The two major adviser associations have called for an end to the scare-mongering tactics being employed by parties opposed to the Coalition’s Future of Financial Advice reform amendments.
The Association of Financial Advisers (AFA) is urging its members to personally engage with Federal Government representatives to ensure they are well informed about the proposed FoFA amendments.
The AFA is currently briefing advisers on the proposed amendments via its GenXt Roadshow, and will shortly issue an Advocacy Pack. The Pack is designed to assist members to ‘distill their message’ when talking with local politicians.
AFA CEO, Brad Fox, said it was vitally important that the scare-mongering over consumer protection was addressed. “With the FoFA amendments we will still have the most regulated financial advice framework in the world including a legislated best interests duty that is well defined, understood and enforceable. The FoFA changes will also help Australians get better access to practical, affordable financial advice,” Mr Fox said.
Financial Planning Association (FPA) CEO, Mark Rantall, echoed these comments, telling riskinfo that all parties needed to get behind the message that advice is a profession, which is working on raising standards and delivering quality advice that can make a real difference to people’s lives.
…we will still have the most regulated financial advice framework in the world
“The principles of consumer protection and acting in the public interest are a critical part of any profession, and we’ve always upheld that,” Mr Rantall said. “Any reporting that doesn’t deliver balance in this debate is unfortunate. We need to ensure that we get the facts across.
“This is about implementing sensible amendments to make advice more affordable, and maintaining consumer protections, which these amendments do.”
Despite widespread industry support, and assertions from the Assistant Treasurer, Senator Arthur Sinodinos, that the proposed legislative changes do not alter consumer protection measures, some stakeholders have continued to argue for the amendments to be scrapped.
Speaking at an industry fund conference in Melbourne last week, Industry Super Australia (ISA) CEO, David Whitely, accused the industry of performing an “extraordinary and unseemly scramble” to rollback the FoFA reforms.
Mr Rantall said that the 16-point plan (from which the FoFA amendments were taken) was well articulated by the Coalition when they were in opposition. “Their position on the FoFA regime was there for consultation throughout their election campaign, and now they’ve delivered on it. This is not a new or sudden policy position.”
However, Mr Rantall did acknowledge that the changes to the conflicted remuneration rules for general advice were unexpected, and required further investigation.
“Our understanding of the reform is that it is meant to allow for bonuses and incentive schemes to be paid to employed advisers who provide general or product advice. We have no issue with providing this flexibility, but we think the wording of the draft legislation may provide for an opening for commissions to continue to be paid on investment products,” he said.
We wouldn’t support legislation that diminishes consumer protection and we don’t believe that the amendments do
Mr Rantall said the FPA did not support a system that embedded commissions into a product where the client had no control over them.
“If we find the reform allows for the reintroduction of commissions we will put forward suggested amendments to the wording of the draft legislation to resolve the issue. We wouldn’t support legislation that diminishes consumer protection and we don’t believe that the amendments do.”
The potential for commissions to be reintroduced was the subject of a recent mainstream media cover story, which suggested that initiatives launched by MLC and CommInsure were taking advantage of the (yet to be finalised) weakened legislation.
In response to the accusation that the new pricing for its Navigator platform is a volume based incentive, MLC issued the following statement:
‘We have introduced new pricing for the MLC Navigator Series 2 to bring it in line with FoFA requirements.
‘The new pricing structure includes a new adviser service support fee for independent financial advisers that they need to agree with their clients. It has two components; an adviser service fee and a dealer facilitation fee.
‘The fees are linked to the advice planners are providing their clients, rather than any volume incentive.
‘The adviser service fee is a fee paid to the adviser for the advice and recommendations they give their clients.
‘And the dealer facilitation fee is a fee for the advice services provided by the dealer group that that particular independent financial adviser is part of. So that includes things like research and assessing the suitability of a product, IT services and other support.
‘The fee must be agreed between the client and the independent adviser, and the client can choose to turn it off at any time.
‘The new fee structure has been designed to be simpler and more transparent – and importantly it’s in line with FoFA.’
I support the AFA & the FPA 110% in their calls to stop the scare mongering about the reforms to FOFA proposed by the Federal Government. The reforms are logical and positive and we’re clearly articulated by the Coalition when they were in Opposition. No one argues with the intent of FOFA in terms of transperancy and the provision of professional, sound and effective financial planning advice for clients; this outcome is what I would wish for we’re I the client. However, the amendments to FOFA proposed by the Government will improve the delivery and outcome of this legislation for Financial Planners and their clients.
The ISA guys just tell lies to try to get the outcome they want. They have all the way through the process, so why stop now?
Peter Collins, Chairman of ISA: Once a barrister, once divorced, once an Opposition Leader, once a lobbyist, no experience as a financial adviser, (and the same goes for Vamos, Cooper, Brogden, Ripoll, Weaven, etc) but now in league with Unionists’ sponsored ISA, and Unionists are in league with criminals says the ABC and Fairfax. So what kind of a job does he have? What right does he have to speak on behalf of Super Clients and Retirees?
David Whitely, CEO of ISA: a nobody who now is a public mouthpiece for Garry Weaven who still effectively controls the ISA.
Let’s stop this rubbish once and for all and let us get on with looking after clients the way we (i.e. real advisers) always have; giving clients peace of mind, tax effective investments, good returns and tolerable risks in a holistic manner.
Blahh, Blahh Bla…lots of noise and time wasting taking place in an industry that is struggling with it’s value proposition. Why don’t people seek advice? Maybe because they don’t see long-term value in paying for it until they reach retirement and the potential need for financial instruments called “Allocated Pensions and Annuities”. Let’s face it…those that are in accumulation phase and have a long-term investment mantra (obviously those that have a short-term approach should be in cash anyway unless someone has a working crystal ball) should be focusing on paying off non-deductible debt within a 10 year time frame. Once repayments are to a level where the 10 years is a reality, only then should people be looking at salary sacrifice into super or ploughing money into other asset classes like an investment property, Shares, Managed Funds, Fixed Interest etc….My point? how do you make enough money out of that very simple and basic yet very effective strategy in the following and subsequent years? The other question I pose…is this actually advice or is it just stating the bleeding obvious…why should you need to produce a 30 – 40 page document at $3,000 – $10,000 cost to educate and train people to employ this strategy when you can fit this on one page. It is not rocket science but the fund managers want you to believe it is yet there are 1,000’s of fund managers and yet not many, if any, consistently outperform the market time and time again. Some do for a few years but which ones are going to do it this year? No one knows so how do you expect people to want to pay money for a maybe?
The other thing that frustrates me is this notion that the product renewal commission is somehow linked to advice. The way I see it is that the renewal commissions are for us to run a business and all the associated costs, which a part of this is client reviews, certainly not further advice and recommendations. If we all start referring to it as a renewal commission, then people who don’t have any idea about the industry (like some Federal Members that need a flogging) will start to get the picture that it costs a lot of time to provide “advice” so don’t keep referring to the “trail”/product renewal commissions as income to provide advice…it is just not true.
Rant over!!!
Thanks
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