Sinodinos announces FOFA changes

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In perhaps the best news financial advisers have had all year, the government has announced advisers grandfathering provisions will be scrapped and advisers will no longer have to sign a new contract with clients every two years.

In a highly-anticipated statement, Assistant Treasurer Arthur Sinodinos announced today the unworkable elements of the Labor-introduced Future of Financial Advice reforms will be amended.

Of particular note to advisers, the government said it will:
  • Change the best interests duty to assist scaled advice
  • Remove the two year opt-in requirement
  • Change the grandfathering clause to make it more fair for all financial planners when changing licensees or selling their businesses
  • Remove retrospective legislation on fee disclosure statements to apply only to new clients
  • Permit commissions for advisers placing clients in financial products
Sinodinos has indicated in the past any legislative changes will be made in the autumn sitting next year.

But Association of Financial Advisers CEO Brad Fox tells Wealth Professional many of the changes can be done through regulation and become effective earlier than this.

In particular, he hopes the grandfathering provision will be the top priority, but says advisers must “wait and see”.

“These are sensible reforms which will certainly ease costs for financial advisers. FOFA in its original format was heavy-handed. The cost of implementation far outweighed benefit to consumers. These changes have put it back in balance.”

The Financial Planning Association also welcomes the changes, which are in line with making the reforms more workable for financial advisers, says CEO Mark Rantall.

“As our members and the wider industry will know, the FPA has long championed changes to ease the cost and red-tape burden imposed by FOFA on financial planners.

“The Government’s estimated average savings of $190 million a year as a result of these amendments will go some way in helping to improve access and affordability of advice to more Australians.”

However, Rantall thinks there is still room to improve.

“We feel there is more to be done to streamline the fee disclosure statement process and we will continue to work with government and treasury for improvements in this area.”
But one party who is not happy with Sinodinos' announcement is Industry Super Australia. 

“ISA urges the Government to stick to the sensible centre or risk further scandals in the financial planning industry," CEO David Whiteley said in a statement this morning.

“The financial advice laws deserve a chance. Australians want impartial financial advice that is in their best interests and not tainted by sales commissions, ongoing advice fees, volume rebates or other types of incentives paid to financial planners by banks and other institutions.
“These proposed changes will re-open the debate about whether a financial planner is an impartial adviser or a sales rep, and will ultimately reduce confidence in financial advice.”