There has been a mixed response from industry stakeholders to the Governments Future of Financial Advice Bill, introduced into Parliament this week.
Forming part of the Government’s Deregulation Package, the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 was tabled in the House of Representatives on Wednesday 19 March by Parliamentary Secretary to the Treasurer, Steven Ciobo.
The Bill contained some key changes from what was set out in the draft legislation, in particular to the areas of conflicted remuneration for general advice and life risk commissions inside super (see: FoFA Amendments Bill Tabled With Revisions).
Speaking to riskinfo on the Bill, the Association of Financial Advisers’ (AFA) Chief Operations Officer, Phil Anderson, said he was surprised that the Government had chosen to remove the exemption on commissions for life risk inside super.
“We wanted it to be extended to address the situation of corporate super advisers giving personal advice to employers, and delivering the improvements from the default insurance arrangements. But what we’ve seen is they’ve taken it out entirely.”
Mr Anderson said the AFA had not been approached by the Government or Treasury in relation to its consultation with the life insurance industry. “Obviously we’ll want to talk to them now,” he said.
Commenting on the changes to the exemption on conflicted remuneration for general advice, Mr Anderson said the Government had significantly tightened the definitions surrounding the measure.
“This is a good thing. What they have done is provide greater clarity as to the circumstances when this exemption would be applicable. There has been a lot of media coverage which has accused financial advisers of engineering a return of commissions – this just takes the vast majority of financial advisers out of play (in relation to the exemption).”
The Financial Planning Association (FPA) also praised the Government for the change to the general advice exemption.
“Today’s change of tack by the Government is a welcome approach. It shows our repeated efforts on behalf of Australian consumers and professional financial planners have not gone unheard,” said FPA CEO, Mark Rantall.
However, the FPA still believes the legislation could go further:
“Whilst this policy shift tightens the pre-conditions under which conflicted remuneration can be paid and is welcomed, the FPA still calls for the removal of the ability to reintroduce superannuation and investment commissions on general advice altogether,” Mr Rantall said.
…the legislation will now allow consumers to get the advice they can afford and want
The Financial Services Council (FSC) commended the Government for the introduction of the legislation. FSC CEO, John Brogden, said: “The government has fulfilled its mandate to make advice more accessible and affordable for Australians whilst maintaining consumer protections.
“Technical amendments in the legislation will now allow consumers to get the advice they can afford and want.
“It also brings clarity and certainty to the advice community, particularly in relation to scalable advice and the best interest duty.”
Industry Super Australia (ISA) was one of the first industry bodies to comment on the introduction of the FoFA amendments legislation, arguing that it would do more harm than good.
“In seeking to cut red tape the Government hasn’t adequately taken into account the potential costs to consumers and the industry from re-permitting commissions through general advice and weakening the best interests duty,” said ISA CEO, David Whitely.
“In one fell swoop, supposed red tape savings for businesses could be far outweighed by consumer losses and reputational damage to the industry itself.”
The ISA did, however, welcome the removal of the measure which would have permitted commissions on group risk insurance in super. But the organisation was not impressed with the Government’s approach to its criticism of the general advice exemption.
“The changes to the scope of the general advice exemption are minor and will still permit the payment of commissions on compulsory super including MySuper products,” Mr Whitely contended.
Finally, Mr Whitely argued against the “rushed” approach to the implementation of the amendments: “The Government should bring together key stakeholders to find a
sustainable outcome that reduces compliance costs without compromising key consumer protections. Such an outcome is achievable if common sense prevails.”
For more on the removal of the exemption for risk commissions inside super, click here.
So a surprise on commissions on risk in super.
Didn’t the AFA, after numerous discussions with Kormann, assure its members that this matter would be corrected ASAP after the Election
Now the Govt is going off on a frolic to talk to the insurers. Guess what-the insurers are going to argue sustainability does not allow it. More profits for them, unpaid work for risk advisers in corporate super.
The AFA was so beguiled by Kormann that they forgot to insist on a place at the table after Kormann/Sidodinis forgot to call the AFA.
What happened to the much trumpeted relationship with a conservative finance spokesman.
Professional bodies who are too close to pollies can be burned. Advisers need their case argued right up to the tabling of the Bill. Doesn’t anyone remember how the independants sprung last minute amendments to FOFA Mark 1
There will be a avalanche of theoretical experts who will muddy the waters to the point where after going round and round, we will reach a point where once again, the legal eagles will need to be paid many millions of dollars to take a simple problem with a simple solution and turn it into illegible legal mumbo jumbo, then be paid millions more to bring the solution back to something that us mere mortals ( aka everyone who is not in the legal/compliance world ) will understand what we already knew in the first place.
If we want to move forward, the quickest way is to talk to experts who actually work in and understand the field, rather than listening to every man and his dog who pretend to know.
These discussions should be based on common sense. I wonder if that will come into the equation.
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