FoFA amendments will start rolling out this week: Sinodinos

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The Assistant Treasurer has signalled that proposed amendments to the FoFA legislation will begin to be rolled out this week, leaving a number of groups highly concerned about what this means for conflicted remuneration.

Senator Arthur Sinodinos spoke to ABC’s Lateline last week about the proposed lifting of a ban on commissions that would allow conflicted remuneration for any financial product as long as the advice was general.

“But once I put the legislation and it will start to happen from next week into the House into the Parliament, I'm going to be keeping a very close eye on it and so will ASIC,” Sinodinos told interviewer Emma Alberici.

Mark Rantall, the CEO of the Financial Planning Association (FPA), told Wealth Professional that the association is urging the government against lifting the ban.

FPA members have been banned from receiving commissions since 2009, and that will continue whether or not the proposed conflicted remuneration amendments get passed into legislation, he said.

“We see it as a retrograde step for consumers. [What] we’ve dealt with in FoFA round one is that imbedded commission had the potential to lead to miss-selling,” he said. “It has the potential to be damaging to consumers, and the reputation to financial planners in general.”

While Rantall said most people in the industry agree that the original FoFA went too far in restricting commercial opportunities and adding extra costs, opening the door to structural changes like commissions for general advice could take the industry back 10-15 years.

Similarly, Phil Anderson the COO of the Association of Financial Advisers (AFA) told Wealth Professional that the association does not support its members pursuing a general advice business model for the purpose of obtaining commissions.

“We have concerns about the potential client implications and therefore have indicated in our FoFA amendments submission that we would like to better understand the circumstances under which this exemption might be utilised,” he said.

However, AFA doesn’t believe that that the general advice exemption is relevant to financial advisers who have close ongoing relationships with their clients – it is aimed at services provided by banks and call centres, said Anderson.
During the Lateline interview Alberici suggested to Sinodinos that the proposal to revert the ban on such commissions is due to lobbying from banks.

“I'm interested to know how much your time [at National Australia Bank] influenced your decision to wind back these reforms?” she asked.

She also suggested selling a product could become as easy as a teller saying: “Would you like an insurance policy with that?”

However Sinodinos insisted that bank tellers would have to disclose to customers that the advice is general, and give them a cooling off period to think about it.

The Age reported the reactions of a number of industry players, who outlined the potential drivers behind or consequences of these changes.

Leon Carter, national secretary of the Financial Sector Union, said: “This is what the banks lobbied for; they want to have unfettered access to every customer and they want their staff to sell regardless of the needs of the customer.”

Matt Levey, director of campaigns at consumer group Choice said the amendments would allow for “a sales pitch driven by a commission with no relevance to the person’s financial circumstances”.

However, John Flavell, the executive general manager of wealth advice at National Bank Australia was reported as saying the exemption of general advice was needed.

“If we can remove some of the costs and complexity and make the provisions of wealth solutions available to more consumers that would be a positive outcome,” he said.

AFA refutes general advice rumours                
Lawyers set out FOFA consequences 
Commissions relate to 'mischief making': Sinodinos