No win for consumers in political fight
FPA supports both workable legislation & higher professionalism among financial planners
Last night’s disallowance of the Future of Financial Advice (FoFA) reforms do not improve protection for consumers, introduce uncertainty, and will make it harder and more expensive for financial planners to serve clients well, according to the Financial Planning Association of Australia (FPA).
Mark Rantall, CEO of the FPA said: “Regardless of politics the FPA stands with its members for a better financial future for all Australians. To achieve that we need both workable legislation and quality advice from financial planners with the highest standards of education and professional conduct.
“The most important principle of FoFA is greater consumer protection. For that reason we support FoFA in principle, and have worked hard for the last four years to achieve better consumer outcomes. Unfortunately the law we now have makes it harder and more expensive for financial planners to deliver good advice.
“The devil is in the detail – and some of that detail is unworkable.”
The FPA’s detailed analysis shows differences between FoFA under Labor (passed in 2012) and the FoFA amendments proposed under the Coalition.
- Opt-In – The current Opt-In requirements for consumers to sign with their advisers every two years applies only for new clients and does not include commission paying clients. This makes this policy redundant and provides no additional consumer protection.
- Fee Disclosure Statement (FDS) – The current requirement to provide a FDS will now apply retrospectively. All clients must receive a FDS but as the regulations now stand there is NO requirement to disclose commissions. This makes it redundant for existing clients and confusing for clients who receive the notice without meaningful disclosure.
- Best interest – The best interests duty is in both Labor and Coalition FoFA. The Coalition amendment provided greater clarity and certainty for how it would work in practice. Under the revised version the best interest duty will now be determined by the Courts as the practical implications of Clause G are not defined clearly in the current draft. This creates uncertainty for financial planners and their clients.
- Scaled advice – Under Labor the best interest duty did not provide certainty for scaled advice. The Coalition amendment was to enable scaled advice with certainty while still meeting the best interests duty.
- General Advice Commissions – both Labor and the Coalition had commissions banned from general advice. The Senate vote has no impact on this.
“The legislation should be workable but at the end of day law is only a minimum standard. The best financial planners have, and will, always go far beyond the letter of the law to deliver a best practice standard of advice.
“The role for financial planners and professional associations now is to continue to uphold the highest standards and to ensure consumer protections are paramount.
“The FPA Code of Conduct provides additional protections for consumers as it sets ethical and conduct standards beyond the requirements of the law. Our professional standards require FPA members to put client interests first, and to act ethically and professionally with integrity, objectivity, fairness, and diligence.
“Under this Code it is our job to monitor and enforce these standards, and apply consequences such as banning members who do not comply with the FPA’s rules of conduct.
“When you seek out the advice of a financial planner, you have the right to know that you can trust the person you find. And there are clear signposts for trust and quality that all consumers should look out for.
“Look for a CERTIFIED FINANCIAL PLANNER® – this is the gold standard for education; look for a financial planner who is a member of a professional association with a strong and enforceable Code of Conduct and professional standards; and look for a financial planner who clear about their expertise.
“At the end of the day, the best advice won’t come from law. It will come from financial planners taking individual responsibility to act according to the highest professional standards.”