Historic financial advice reforms a win for Australian consumers

The passing of the Future of Financial Advice Bill in the House of Representatives last week is set to significantly improve the retirement outcomes of industry super fund members.

In an historic move for Australian consumers, the Future of Financial Advice (FoFA) Bills passed through the House of Representatives last week.

These reforms will significantly improve the retirement outcomes of industry super fund members, and consumers more broadly, and ensure that they can receive high quality professional financial advice that is in their best interests.

Robbie Campo, Manager Strategy, said that while the reforms are moderate, they represent a comprehensive set of measures that will substantially deliver on the Government’s policy objectives to improve the quality of financial advice in Australia, strengthen investor protection, promote trust and confidence in the system, and encourage more people to seek financial advice.

“For the first time, financial planners will be required by legislation to act in the best interests of their clients, and sales commissions and other forms of conflicted remuneration will be prohibited,” commented Robbie.

“Importantly, the biennial ‘opt in’ requirement will ensure ongoing asset-based fees do not simply replicate trail commissions and unnecessarily reduce super savings.”

ISN supports the final proposal which will enshrine ‘opt-in’ in the law, but with the flexibility for financial planners and licensees to gain relief from ASIC if they sign up to an approved code of conduct.

“ASIC will provide relief to licensees and financial planners who are bound by an approved code of conduct, which obviates the need for the opt-in requirements,” said Robbie.

“This dual approach delivers protection for consumers and the opportunity for the financial planning industry to realise their objective to be regarded as a respected profession, an objective which is supported by industry super funds.”

Key aspects of the reforms

Best interests duty – requires advisers to act in the best interests of their clients. The duty provides some details around how an adviser can prove that they have acted in the client’s best interests by following a number of reasonable steps.

Opt-in measure – requires advisers to get consent from clients every two years to continue to charge ongoing fees for financial advice. Clients must be provided with fee disclosure in the intervening year. However, ASIC can exempt by class order relief any provider bound by an ASIC Approved Code of Conduct, which obviates the need for the legislative measure.

Annual disclosure – requires advisers to provide clients with an annual disclosure notice that provides information on  fees and services for the previous year, and also notifies them of their right to ‘opt-out’ of an ongoing advice contract.

Enhanced regulator powers – the Australian Securities and Investments Commission (ASIC) will have increased powers over the licensing and banning of financial planners with the capacity to refuse, suspend or ban a licence if an individual is deemed to have contravened or likely to contravene the obligations.

Ban on conflicted remuneration and commissions – under the new legislation, a range of conflicted payments will be banned, including commissions on investment products, commissions on risk insurance in MySuper and group risk products, soft dollar benefits and volume payments to employees and dealer groups.

Media Release: Financial advice reforms a win for consumers and financial services industry

Media release from ISN says new reforms to the financial advice industry are set to double the number of Australians accessing financial advice and increase private savings by $130 billion, according to a new report by Rice Warner Actuaries. The report also shows that financial adviser numbers will remain broadly stable.

To view the Rice Warner  report click here.

Financial advice reforms a win for consumers and financial services industry

Media release from ISN says new reforms to the financial advice industry are set to double the number of Australians accessing financial advice and increase private savings by $130 billion, according to a new report by Rice Warner Actuaries. The report also shows that financial adviser numbers will remain broadly stable.

To view the Rice Warner  report click here.

Media Release: New rules on intra-fund advice set to provide more accessible and affordable financial advice to all Australians

Media Release by ISN  shows the new rules issued by the Government on the delivery of ‘intra-fund’ advice will make financial advice more accessible and more affordable for ordinary Australians.

Read the Media Release here.

New rules on intra-fund advice set to provide more accessible and affordable financial advice to all Australians

Media Release by ISN  shows the new rules issued by the Government on the delivery of ‘intra-fund’ advice will make financial advice more accessible and more affordable for ordinary Australians.

Read the Media Release here.