Profession welcomes the next stage in financial planning reforms
The Financial Planning Association (FPA) has responded in support of the FoFA Tranche 2 reforms tabled in Parliament this morning, noting the government’s effort to improve the quality and availability of financial advice for all consumers.
“The FPA has been in communication with the government over the past two years to ensure FoFA works for both financial planners and consumers. FoFA is an initiative developed to improve transparency and access to financial advice to safeguard the financial future of all Australians. We released our remuneration policy on banning investment commissions to members in 2009, which laid the groundwork for transparent payments, giving our members a head-start for the transition,” said Mark Rantall, CEO of the FPA.
The professional association represents over 8000 financial planners, who are committed in improving the financial affairs of more than five million Australians.
Tranche 2 includes the banning of conflicted remuneration payments that influence financial advice. Also included in Tranche 2 are amendments to the Best Interest Duty with the aim of encouraging actual behavioural and motivational change rather than a tick-a-box style of compliance.
The FPA welcomes the banning of investment commissions and other conflicted remuneration, in line with its own remuneration policy due to commence on 1 July 2012.
Recent research conducted by Investment Trends, shows that over half of CFP® holders are already deriving their revenue from fees, rather than commissions, compared to the industry average of 43 per cent.
“The FPA and our members have led the way in the banning of commissions and believe that this industry move will promote trust and confidence in financial advice and provide a better outcome for all Australians. It is clear that FPA members are leading the profession in these transitions and we welcome the government initiatives to encourage this with all financial planners,” Mr Rantall said.
The FPA has also outlined areas of the reforms that have raised concern, including some measures within banning the soft dollar benefits and the definition of Group Risk.
“The FPA supports the majority of the measures in banning soft dollar benefits, and they mirror existing FPA standards set by an industry benchmark. However we do not agree that ‘location’ should be a factor – the FPA believes that if a financial planner can participate in a legitimate professional development conference, it should be irrespective of whether it is in Australian or Overseas.”
“The FPA has a concern with the definition of Group Risk and believe the current definition within the legislation could cause some unintended consequences and costs for consumers as a result.”
“As a whole, the FPA believes that the reforms announced in FoFA Tranche 2 are supportive of the financial planning profession, our members and all Australians.”
The FPA will now review the legislation in detail especially in respect to transition and the practical application of the amendments.