BREAKING: Sinodinos announces FOFA consultation

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Treasury has just announced it has opened FOFA amendments for public consultation over the next three weeks.

Assistant Treasurer Arthur Sinodinos said today the Government has released the draft regulations and legislation for its proposed reforms to the public to discuss.

"Delivering on the Coalition's election commitment, the Government has today released draft legislation and regulations to reduce compliance costs and remove red tape on the financial services industry," said Sinodinos.

"The Government is supportive of the principles of FOFA, but the previous Government's reforms are unwieldy, burdensome and unnecessarily complex. The proposed reforms will reduce the burden on industry and pressures on the cost of advice to consumers.”

Consistent with the Government's announcement on 20 December last year, key amendments include:
  • removing the opt-in requirement
  • streamlining the annual fee disclosure requirements;
  • amending the best interests duty to allow for scaled advice;
  • exempting general advice from conflicted remuneration; and
  • amending grandfathering to allow for adviser movements.
The draft legislative amendments and draft regulations are available at the FOFA website.
To try to get the law in place for the financial services industry as fast as possible, the Government will put in “time sensitive measures” through regulations to the extent legally possible, with amendments to be subsequently made in the primary legislation, Treasury said.

The interim regulations – those made redundant by the passing of the legislative amendments – will be repealed once the legislative amendments have been passed, while amendments best addressed via regulations will remain in place.

The consultation process will be open for three weeks, with submissions closing on 19 February.

Following the consultation process, the Government predicts regulations will be made at the end of March 2014 and a Bill will be introduced into Parliament in the 2014 autumn sitting period to be passed into law during the winter sitting period.
  • Innocent Observer on 31/01/2014 1:33:36 PM

    Sorry for the presumption @Trev.

    Maybe I am not making my point clear enough. I am looking at the bigger picture of what FoFA (in the framework originally proposed) would do to the accessibility, quality and cost of advice to clients. For my business, it is a little bit extra that we charge the clients to cover our additional compliance costs. The client pays the full cost of this (I'm running a business, not a charity).

    As for those who the legislation is designed to "catch out", sure there probably are advisers out there taking a trail fee for little or no service, but I would hazard a guess that nearly all of that trail would be commission (and exempt from FoFA's FDS requirements anyway). I'm sure in your 20+ years you would have seen this anyway. Fee for service was hardly mainstream until maybe 7 or 8 years ago (testing my memory on that....but I think that's about when the tide started to turn).

    Anyway. We could debate this all day, but the point is that while the spirit of FoFA is good (client's needs upmost), the strategy and execution was awful.

  • James Smith on 31/01/2014 11:39:34 AM

    Agreed Grad.
    The concerns raised by Big Trev will be addressed if customers are required to access qualified advisers that are held accountable by their own professional standards. Also trailing commissions no longer apply and have been replaced by service fees. The inference that adviser fees collected via an investment platform should be stopped denies the practical reality that these fees are to provide personal service and advice that the platform does not provide. This is a cost saving to the platform and should be reflected in their pricing.If the service/advice is not provided the client has the choice of changing adviser or stopping the adviser fees. It is a shame that advisers continue to talk down our industry and fail to acknowledge the progress that has been made in our professional standards. Advisers inferring that the actions of Storm define all advisers who receive service fees from a platform is particularly disappointing. The irony is that many clients are afforded much better protection within a platform rather than a self directed portfolio that relies on the governance of the adviser principal. It has been extremely satisfying sending out 6 monthly client investment updates showing clients funds have been safeguarded and rewarded for taking our advice and enduring through difficult market conditions. For the record, our business recommends both platform solutions and personally tailored portfolios ( what best suits the client needs sound familiar ?).

  • Grad on 31/01/2014 9:44:14 AM

    What do you guys think about the reintroduction and expansion of the general advice business model, now made possible by the reintroduction of conflicted rem? Isn't that cutting into your business?

    What's the use of improving the reputation and standards for financial planners if institutions who use general advice models are going to cash in on that reputational capital and provide a much cheaper service? When it goes belly-up, it will be financial planners who cop it.

  • Big Trev on 31/01/2014 9:34:59 AM

    + 20 years

  • Innocent Observer on 30/01/2014 4:52:12 PM

    @Big Trev. I'm guessing you're new to financial planning, so welcome. It's good to see some passionate young blood (genuinely I think it's great).

    But it's worth considering that there is a big difference between the "spirit" of FoFA (which I think most of us endorsed) and the practicalities of implementing Labor's proposed solution. That's the problem. I would guess that 99.9% of advisers are all for providing the very best possible solution for their clients, and as a business owner I know that FoFA was doing nothing for our clients; in fact it was doing the opposite by pushing up our administration costs and reducing the time that I could spend actually talking to clients about what mattered to them.

    I agree that knowledge enhancement would be a step in the right direction. But we should also bear in mind that many advisers aren't trying to be a "jack of all trades". We are experts at what we know, and we bring in experts for areas we don't.

    I'm all for consumer protection and transparency, however adding another layer of red tape does not help the cause, it just makes it a thicker jungle for the crooks to hide in.

  • James Howarth on 30/01/2014 10:27:31 AM

    These amendments really do nothing but get us back to preLabor.

    What about removing dealer groups in favour of direct licensing.

    What about streamlined AFSL applications?

    Liberals are doing nothing, Sinodinos is a weak politicians for our industry.

  • Big Trev on 30/01/2014 9:13:59 AM

    Big Trev actually IS an adviser, who actually puts the client first, rather than just talk about it. So Peter. Some questions then. What's you problem with putting every possible prototection in place to ensure that Mum and Dad investors dont entrust their life savings to a twit that's done a TAFE level course at best and in many cases, couldn't explain a first year economic principal let alone do a plan. So bad, they have to rely on a paraplanner which simply makes them a distribution point for the fund manager's products ? What's wrong with an Adviser that believes that if a client is paying you via trail, he actually physically meets these clients at least once and sometimes twice per year. An adviser who also thinks that ISN is a front to collect revenue via management fees which ultimately, gets piped through to the parent Union body ? An adviser that has seen the Westpoints, Storms, MIS and other disasters unfold while "professional planners" (Phhht!) poured their client's money into them. Why is it that the better ones kept well away from it ? Knowledge & Ethics my friend, Knowledge and Ethics. Neither of which is enahnced by the Sinodinos backdown.

  • PETER CORRIE on 29/01/2014 5:33:11 PM

    Big Trev is obviously not an adviser.
    The Liberal Party are obviously committed to helping small business by changing FOFA for the better, however ,the sooner the better. Other changes to FOFA also need to be looked at in the future but at this stage we can only hope that the current legislation is not only passed through the parliament but endorsed by the Senate.
    We need to pressure the government ie Advisers and their Associations, Licensed Dealers and Executives of life companies and Fund managers to get ASIC off our backs so we can operate without the prejudices restrictions and over regulation that exists at the moment.

  • Innocent Observer on 29/01/2014 1:03:38 PM

    It would be great to see some constructive input into the discussion from the AFA, FPA and dealer groups.

    (ISN too, if they can get past their egotistical ambition of world domination by crushing what they perceive* to be their rivals)

    *ISN= product manufacturer & administrator. Advisers = those providing valuable and constructive advice and guidance to clients, in the best interest of the client. Anyone else get the feeling that the guys up the top rung of ISN don't quite understand this? ...makes we wonder why we can't we all be friends

  • Garry Crole on 29/01/2014 12:57:25 PM

    A sensible approach to a very importanct piece of legislation .

  • Big Trev on 29/01/2014 12:40:59 PM

    Fund Managers 1, Consumers Nil.

    Advice Based Distribution lives on. No problem with sensible reforms but how does any of the above ensure the consumer is not being serviced by advisers with low education who have been pushed through internal RG146 "Programmes" to ensure that the sales targets are met? The White Shoe brigade who think that effective financial planning is about having 2000 "clients" who feed trail into their bank accounts for doing nothing other than "being available" will waive the banner of success with vigour. Pi$$ weak Sinodinos, Pi$$ weak. Storm MKII is just around the corner.

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