Organisations and commentators with vested interests in the superannuation savings of Baby Boomers are putting Australian’s retirement lifestyles at risk by undermining confidence in personal financial advice, the Association of Financial Advisers (AFA) has warned.
Responding to recent commentary about the Future of Financial Advice (FoFA) amendments which suggests the changes will reduce consumer protection, AFA CEO, Brad Fox, questioned whether such commentary was in the best interests of Australians.
“We have seen gross inaccuracies being reported as facts across a wide range of publications and media programs, so the question has to be asked: how are these actions, which undermine the confidence of Baby Boomers in personal financial advice, in the best interests of Australia?”
Mr Fox was particularly critical of Industry Super Australia (ISA), which as recently as last week issued a statement saying it had received legal advice that the best interests duty changes were flawed (see: News in Brief – ISA Continues FoFA War of Words).
As a nation, we need more Australians better prepared for retirement, not less
“What I don’t understand is why, when transparency is so important to the reform of financial services, the ISA, which is the modern representation of the union super fund movement and the loudest critic of the amendments, has not made its submission to the Government on the FoFA amendments publicly available,” Mr Fox said.
At the time of publishing, the ISA had not made their FoFA submission available to the public.
“It seems particularly inconsistent with ISA’s calls for transparency, and you have to ask why it has not been released publicly,” Mr Fox said. “We think it is reasonable to expect full transparency on these types of issues or consumers could question whether they can trust the integrity of the agenda.
“Prime time television commercials, newspaper advertising and sponsorship of sporting events and organisations such as AFL and NRL clubs are an enormous expense paid for from members’ superannuation money. This makes them a powerful lobby group and raises questions about whether their lobbying actions are consistent with the objective for more Australians to get quality personal financial advice and thus achieve a comfortable retirement. As a nation, we need more Australians better prepared for retirement, not less.”
Mr Fox believes the FoFA amendments will create the world’s strongest legislated requirement for financial advisers to act in the best interests of their clients.
…fix the legislation now so that baby boomers nearing retirement can seek the financial advice they need
“As law, the amendments will give clarity so that every financial advice client, along with anyone else who wants to scrutinise the advice given to the client, will be clear on whether the adviser has or has not met this robust and comprehensive duty to act in the client’s best interests. The Law Council of Australia has publicly supported the amendment to the best interests duty. It will give consumers increased confidence to trust the financial advice they receive.”
Without the amendments, Mr Fox said the best interests duty would need to be tested in the courts. “The best interests duty will be left with a cloud hanging over it for years and that cloud will not be cleared until court cases remove the ambiguity. The sensible thing to do is to fix the legislation now so that Baby Boomers nearing retirement can seek the financial advice they need with certainty.”
The AFA’s comments come on the eve of the introduction of the FoFA reform legislation into Parliament (see: Corruption Claims Threaten to Overshadow FoFA Amendments).
The Financial Services Council also issued an eleventh-hour statement in support of the FoFA amendments, highlighting its own legal advice which shows consumer protections will remain in place (see: Best Interests Changes Won’t Impact Consumers – FSC).
Excellent Article – thank you.
MD SRES – Aust
Thanks for a balanced article that reports the reality of the situation.
Well said Brad, it is a shame that the best interests of consumers are not being considered in this power struggle by ISN. I would love some independent reviews of the positive aspects of financial planning for the people that matter, the consumers.
While it is legitimate to question the motivations and style of the critics of the new Government’s policy changes on FOFA, the substance remains: the overdue reforms boldly promised by Labor in the light of the myriad scams (Westpoint, Storm, Trio et al) placing the short-term inducements of conflicted planners ahead of hapless investors have been hopelessly diluted out of shape, pandering to the provider and commission-ridden adviser lobbies. Comment by all means on the Industry Funds’ campaign form by all means, but the fact remains that the diluted reforms have restored us to the pre-Storm mindset. Worse, in fact, as the previous perpetrators can now boldly sally forth, without being worried about legislative tightening.
Those of us who consider ourselves finance professionals, and are perhaps better able to guard against the machinations of intermediaries, product-floggers and their commission-focused advisers must ponder for one moment if we would welcome such a regime in regard to our and near-and-dear ones’ physical health: doctors, surgeons and nurses, with allied pharmacists and para-medics encouraged to flog products and services regardless of the detriment to our health?
Putting client interests first without ifs and buts; banning soft and hard commissions on asset sales; requiring periodical ‘opt ins’ to justify trail revenue – none of these is cutting-edge solution to manage inherent conflicts compounded by self-interest. Yet, Australia proudly flaunting its exalted status in superannuation rankings across the globe, is crawling back centuries, while still calling the associated trades a profession?
If the diluted reforms must stay, balance the equation with criminal sanctions for the providers, advisers and sundry associates (auditors and lawyers), not the current wet-lettuce therapy of Enforceable Undertakings (‘yeah, all right, won’t do it again’ by criminals). As we force people to save for retirement with hard and soft tax subsidies, there is a corresponding obligation to secure them from purloining professionals.
Trio’s alleged master mind is at large overseas with the regulator wringing its hands in lofty legalism. Let those who support dilution now compensate the poor investors who trusted the system.
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