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.”

  • James Howarth on 11/01/2014 1:05:40 AM

    Fee disclosure statements are already being sent by product, why do it twice?

    sinidinos did not go far enough,

  • Mel on 24/12/2013 4:44:51 PM

    If our industry was as unethical as David Whitely believes it is, he might be getting some home visits from some unwanted "advisers" of the less than ethical kind. Fortunately for him, we all believe in what we do, and how we do it, and therefore do not need to sink to the type of tactics the unions are rumoured to use to get their way in certain things.

  • Jon Dixon on 20/12/2013 4:52:42 PM

    yay...a govt with brains.....if you vote Labor you vote for people who have thier own agenda not that of the public

  • GAB on 20/12/2013 2:38:30 PM

    The best result of all that would really drive down costs and lift productivity would be.....yes that's right....get rid of SOAs as they currently stand. Sick of having to repeat my advice three times in the one document, sick of having to repeat the client objectives three times. Wake up dealer groups...add some value for a change. Now is your chance. Sadly all I can see is dealer groups salivating over how many in house products they can now build.

  • James Smith on 20/12/2013 12:30:13 PM

    So David Whitely does not support ongoing advice fees but wants impartial advice that is in the clients best interest. How does he expect advice practises that are run separately from the investments that are recommended to operate without ongoing advice fees ?
    Whitely does not service clients, does not manage funds, does not understand the principles of running a business, does not understand what is involved in providing ongoing advice and service making it impossible for him to manage staff that are employed to do that. Given that, what is he actually paid to do ? Is his salary expense in the best interest of members ? David is it time you moved on and let the real players who are adding value in this industry look after clients best interests.

  • Geoff from Perth on 20/12/2013 10:55:35 AM

    Finally some good news for our industry as common sense prevails. David Whiteley should perhaps have a look in his own backyard about scandals such as some of the investments and valuations of Industry Super Funds whose customers would not have a clue where they are invested. Our industry now has a chance to operate efficiently, provide good quality advice and proper management of a client's portfolio. Much more that what an ISA fund does.

  • Steve on 20/12/2013 9:48:57 AM

    I love how the FPA has sat on its hands powerless and helped labour with fofa & it's ridiculous rules to now say they champion to ease cost to advisers!?! FPA are you serious!?

  • Craig Smith on 20/12/2013 9:47:20 AM

    Great news as despite the belief that there is a magic red button we can push to deliver all requirements needed for FDS there isn't. However good news is that by making a concerted attempt to comply we now have a much clearer view of clients we want and those we don't as well as a great understanding of the value of our services. Despite Labor's attempt to damage my business they have made it stronger LOL

  • Andrew on 20/12/2013 9:41:17 AM

    It's about time that there is some form of brains and common sense within the government. I bow my hat to you. However, typical about the union driven industry super funds always having a whining about something. Did you want cheese with that whine? If they are to profit members then I bet the CEO doesn't get paid $50,000 a year or do it out of good will. Do that and then I wouldn't call u hypocrites.

  • Fred Smith on 20/12/2013 9:38:53 AM

    I love how the Industry Super Funds are now concerned about reducing confidence in financial advice.

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