Advisers, licensees and other industry stakeholders have voiced their frustration with the delays to the implementation of the Future of Financial Advice amendments, and the impact those delays may have on the industry.
In a another tumultuous week in Canberra, a week that has seen the FoFA debate reach the front page of mainstream media, the latest development is a commitment by stand-in Assistant Treasurer, Senator Mathias Cormann, to place a pause on the release of regulations attached to the FoFA amendments (see: Cormann Calls a Halt to FoFA Regulations).
Senator Cormann’s decision follows the referral last week of the FoFA amendments legislation to the Senate Economics Committee for further consultation, and the standing aside of Assistant Treasurer, Senator Arthur Sinodinos, who is due to be called as a witness before the NSW Independent Commission Against Corruption in a case involving issues related to Australian Water Holdings.
While there has been a measured response to these delays by some industry stakeholders, others have expressed their frustration with the lack of progress.
Association of Financial Advisers CEO, Brad Fox, supports the now extended opportunity for all industry contributors to have their say. He said Senator Cormann’s announcement “…represents another appropriate, pragmatic step from the government in managing the FoFA amendments. It will give those parts of the market that have had difficulty in accurately speaking about the amendments the opportunity to understand that they improve the legislative outcome for consumers by providing clarity and certainty, especially with regard to the best interests duty”.
Elsewhere, Bombora Advice Founder, Wayne Handley, called for a more sensible approach to advancing the FoFA amendments. Mr Handley suggested the Government seek further consultation on the two main issues (the conflicted remuneration question surrounding the delivery of general advice and the potential watering down of client best interest requirements), but release the rest of the changes, including a resolution for the outstanding issue of grandfathering provisions for advisers who switch licensees.
“We want to be able to get on with business,” said Mr Handley, who sees the delay to the amendments and their regulations as the latest in a series of roadblocks for the industry to negotiate.
… most advice businesses still can’t move or sell their businesses due to the lack of certainty caused by the delays
Connect Financial Service Brokers CEO, Paul Tynan, expressed his frustration with the delays. He acknowledged that, while the movement of risk-focused advice businesses between licensees was less problematic (given that life insurance commissions do not fall within the grandfathering provisions relating to conflicted remuneration), he expressed his disappointment that most advice practitioners still can’t move or sell their businesses due to the lack of certainty caused by the delays.
Mr Tynan renewed his call from earlier this year for the industry to re-define the term ‘advice’ to ‘aligned’ and ‘non-aligned’ advice, in order to promote greater transparency for the consumer (see: Consumers Take Back Seat to Self Interest). Mr Tynan reiterated the key distinction that separates these two definitions of advice relates to ownership of the client and whether the adviser is able to retain his/her client book if they move to another licensee.
Meanwhile, Seaview Consulting Director, Bob Neill, said there had initially been a ‘loosening up’ of market activity following statements made late last year by the Government and the regulators, who indicated they would give a lot of scope to advice businesses who take action in anticipation of the proposed amendments being passed into law. However, Mr Neill told riskinfo that the renewed uncertainty surrounding the future of the FoFA amendments demands great caution for any adviser or advice practice looking to sell their business or switch licensees.
The Senate Economics Legislation Committee is due to release its report into the proposed FoFA amendments legislation on 16 June.
Its all very frustrating, and commentators keep on saying advisers are to blame for the cost of advice being so high. Pah! Its all down to governments and the legalistic beurocracy which doesn’t know where to stop once an industry is in its sights.
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