While the financial services industry has thrown support behind the amendments to the Future of Financial Advice (FOFA) legislation – which were tabled in Parliament yesterday – many are still concerned about the exemption for general advice from the ban on conflicted remuneration.
The Government has tightened the exemption for general advice, but the SMSF Professionals’ Association of Australia (SPAA) and the Financial Planning Association (FPA) are still urging for its removal.
SPAA chief executive officer Andrea Slattery said the best consumer outcomes are achieved independently from links with product remuneration that can incentivise the sale of products over the provision of objective, quality advice.
”The best approach, in our opinion, is an environment where an adviser’s remuneration is aligned with providing high quality advice without the influence of commissions,” she said.
“SPAA understands a key motivation of the Government’s amendments to remuneration of general advice was to increase access to general advice by lowering the cost of this advice,” Slattery added.
“However, improved availability to general advice does not equate to consumers receiving financial advice that is appropriate, adequate or will assist them in making improved financial decisions.”
The FPA has also called for the removal of the ability to reintroduce superannuation and investment commissions on general advice altogether.
“This change, however, does draw a firm line between the polar opposites of product sales and appropriate financial advice,” said FPA chief executive officer Mark Rantall.
The industry has, however, broadly welcomed the changes to FOFA.
The Financial Services Council (FSC) said the Government had fulfilled its mandate to make advice more accessible and affordable to Australians, whilst maintaining consumer protections.
“Technical amendments in the legislation will now allow consumers to get the advice they can afford and want,” said FSC chief executive John Brogden.
“It also brings clarity and certainty to the advice community, particularly in relation to scalable advice and the best interest duty.”
Much support was thrown behind the amendments to the best interests duty, with the FSC pointing to new legal advice it had obtained which states the amendments would not reduce consumer protection.
Similarly, SPAA has supported the changes to the best interests duty, stating the existing legislation had the potential to be too broad in its application, which could create uncertainty and cause a high compliance burden for financial planners.
“SPAA does not agree with the criticism that the changes to the best interests duty have inherently weakened how it works,” SPAA chief executive officer Andrea Slattery said.
“In our opinion, the general requirement to act in the best interests of the client in relation to advice still remains.”
