The Association of Financial Advisers said it is untrue the general advice exemption proposed under the FOFA amendments will mean conflicted remuneration will be paid to financial advisers.
“These claims are totally misconceived,” said AFA CEO Brad Fox.
“The interpretation of the FOFA amendments relating to general advice has been reported as meaning that financial advisers will provide general advice in order to be able to receive conflicted remuneration. These claims are a misinterpretation of the purpose of the draft FoFA amendments.”
The AFA said the general advice amendments were drafted to facilitate the general advice services provided by banks and call centres, for example, and will have no relevance to the activities of financial advisers who provide personal advice and have ongoing relationships with their clients.
The exemption for general advice was part of the Coalition’s policy position on FOFA and dates back to their dissenting report to the PJC Inquiry into FOFA in February 2012.
“The AFA has, however, never advocated for this exemption on behalf of financial advisers,” Fox said.
General advice is the provision of a recommendation or statement of opinion that is intended to influence a person to acquire a financial product, where the provider has not considered the person’s objectives, financial situation or needs.
“Unfortunately these recent reports on the general advice exemption could be interpreted to mean that financial advisers are seeking to exploit the FOFA amendments and continue to use conflicted remuneration models,” Fox said. “This could not be further from the truth.”
The AFA is concerned a solution has not been found for the ongoing remuneration of corporate superannuation advisers.
Whilst complications exist, there is some possibility that the general advice exemption may provide some form of solution for corporate superannuation advice, it said.
But the AFA does not support this approach and would like to see an alternative solution developed to address the remuneration of corporate superannuation advisers, so they can both recommend a default superannuation fund to an employer and provide ongoing services to the employer and the members.
“It is unfortunate that these claims about the general advice exemption are being used to damage the reputation of financial advisers and the regulatory framework in which they operate,” Fox said.
“The provision of general advice is inconsistent with the manner in which financial advisers help their clients to achieve their objectives. While the general advice exemption may have a role to play elsewhere in the financial services industry, it is simply irrelevant for the financial advice profession.
“Australia has the most robust regulatory regime in the world. The AFA is committed to a culture in which its members are dedicated to improving the quality of advice to Australians."