Flimsy arguments and scaremongering: FPA

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Flimsy rhetoric fuelling the fires of public fear that advisers will no longer act in their clients best interests are simply misleading, the Financial Planning Association said.
 
Australian consumers have “nothing to fear” from proposed changes to remove the catch-all provision – section 961(B)(2)(g) – of the FOFA best interests duty, said FPA CEO Mark Rantall.
 
Instead, it is “unnecessary scaremongering” which is distorting the facts for political gain, he said.
 
“We are witnessing an extraordinary effort by product providers and those who represent them to build a political position – based on flimsy arguments – in defence of a redundant section of FOFA pertaining to the best interests duty.”
 
Last Friday, Industry Super Australia CEO David Whiteley said the country would be worse off than before FOFA came in, with clients’ best interests no longer top priority if the amendments passed.
 
In its regulation impact statement, released January, the government said removing the catch all provision from the best interests duty would be beneficial for the financial services industry.
 
“[The industry] has expressed concerns that the current provision is unclear due to its open-ended nature and has created significant legal uncertainty on how advisers can actually satisfy the best interests duty.”
 
The government predicted consumer groups would be unhappy with the change due to fears the care duty was being weakened, but said the removal would make the duty more objective and make sure it works as a “true safe harbour” for client protection.
 
In an attempt to counteract damage done by statements from industry bodies such as ISA, the FPA has set out what it terms the “facts about sub-section g”.
 
This includes stating the best interests duty obligations are a statutory obligation in law for the first time, and that the industry pushed for safe harbour steps to provide some criteria for how a financial planner could be judged.

FPA pointed out the obligation does not end with the seven safe harbour steps set out in FOFA.

The best interests duty and related obligations in the Corporations Act require financial planners – when providing personal advice to retail clients – to act in the best interests of their clients, provide appropriate advice, warn the client if advice is based on incomplete or inaccurate information and prioritise the client’s interests. 

“The obligation to warn clients and provide advice that is appropriate was present before FOFA, however the obligation to act in the best interest of the client and to prioritise the client’s interests are new and are not being repealed,” Rantall said.

The proposed change to the best interests duty is simply the removal of the seventh safe harbour step, he stressed.

“This does not in any way remove or diminish the legal obligation for a financial planner to ‘act in the best interests of their clients’ as required in division 2 of part 7.7A of the Corporations Act.”

Rantall also pointed out the FPA has its own code of conduct requiring advisers to act in their clients’ best interests. 

MORE:

ISA: Clients' best interests not top priority

Fox: Vitally important to lobby this cause

Lawyers set out FOFA consequences
  • Alistair on 12/02/2014 9:53:39 AM

    I as am sure many FP's heard a circus clown called Bowen refer to these provisions as necessary to ensure advice is dispensed properly with the bad apples dealt with via this clause. You know to protect the consumer from those nasty FP's who are highly qualified, reputable, intelligent, hard working and dedicated to their client folks and also run businesses who employ others.
    Face it, Bowen, Shorten, Ripol, Labor have caused nothing but economic terrorism during their confused reign over this country.
    Their legacy now sees tens of thousands of jobs gone and more to come I fear. Recession you say....possibly....
    Yet they want to tell business how it should be run.
    Thank god they are gone and hopefully some of them including the trustees of the ISN network will be bought to account, with even some going of to that place called jail thanks to a tougher Corporations Act.
    Good riddance to their nonsense, now for the economy....

  • Innocent Observer on 12/02/2014 10:17:15 AM

    Is it just me, or is anyone else FOFA'd out?

    And what is a "best interest" provision? Isn't that what we (and I think I can speak for 99.99% of advisers out there) have been doing all along???

  • Merv Gay on 12/02/2014 10:19:46 AM

    Yawn .....Ho Hum again....Well after all that I think I'll go and have a good lay down. This inbred anal stuff makes me so tired and listless. Best interest duty has made no difference to honest advisers for the last fifty years. Absence of Best Interest Duty has made no difference to advisers for the last fifty years. Best Interest Duty or absence of makes no difference to dishonest advisers anyway. Now let me get back to sleep. Merv Gay

  • carl on 12/02/2014 10:48:27 AM

    Absolutely agree, Alistair. I heard an expression yesterday which said " I would not like my reputation attached to ?????(anything no good) and I thought of these guys you mention but on reflection I think one has to have a reputation they are proud of in the first place.

  • Suckitup on 12/02/2014 11:24:57 AM

    Alistair...your rant reads like that of a paid LNP troll...all that Sinodinos is doing is paying back his party's electoral debt to those vested interests in our industry that raged long and hard against FoFA in order to get it repealed

  • carl on 12/02/2014 2:38:20 PM

    Suckitup, Take a big breath and Suckitup.

  • Leadership Free Zone on 1/03/2014 12:15:47 PM

    The only people who don't like 961B are product floggers.....oh whoops, that's 80+% of industry who mistakenly (or should that be deludedly) think they're financial planners.

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