This morning Senator Cormann broke the silence from government figures since the release of the Senate committee report on Monday, putting into motion the amendments the Coalition took to the election and has sought to bring about since the very beginning of the FOFA process.
The announcement reiterates the Abbott government’s longstanding position that Labor’s FOFA reforms went too far, and that the Coalition sought a new policy agenda which would “strike the right balance between appropriate levels of consumer protection and ensuring the availability, accessibility and affordability of high quality financial advice”.
In releasing his response, Senator Cormann made clear that the amendments will remain as previously proposed on the best interest duty, hitting out at the “inaccurate assertion that we were somehow abolishing or significantly watering down the best interest duty for financial advisers”.
The minister also lashed out at the “equally inaccurate assertion that we are reintroducing commissions for financial advisers”, propagated largely by the campaign led by Industry Super Australia in cahoots with the Australian Council of Trade Unions and their allies in the Labor opposition front bench.
However, at the same time, the government will introduce additional clarity on the general advice exemption to the conflicted remuneration rules – as recommended by the senate economics committee report – in order to snuff out any criticisms that the amended FOFA allows an avenue for banks or other advice provision parent companies to sneakily reintroduce commission payments.
“The government is moving to put this absolutely beyond doubt by prescribing that any payment related to the provision of general advice cannot be an upfront or a trailing commission,” Mr Cormann announced.
“To put absolutely beyond doubt how serious the government is about not permitting commissions in these circumstances, we also intend to put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration.”
Commenting on the change this morning, FPA chief executive Mark Rantall described this additional clarity by the government as a “removal of the Wolf of Wall Street clause”.
“This gap in the FOFA draft needed to be closed and nailed shut forever by the government,” Mr Rantall said.
“The concept of rewarding sales people on the volume sales of financial products and services in the form of embedded product commissions is a bygone practice and has no place in a professional, client-centric advice world.”
Unlike the senate report, Cormann’s statement today also provides some answers on the crucial issue of grandfathering, indicating some closure to the confusion surrounding these provisions, which advice business owners will no doubt welcome warmly.
Many of the amendments may be implemented via regulation as soon as July 1, including the removal of opt-in and fee disclosure, the removal of the catch-all provision in the best interest duty and greater clarity on scaled advice.
Other measures are set to go before the parliament where the votes of a number of key Senate crossbenchers may ultimately be the decider.
The announcement today is a win for the financial advice industry associations – and in particular the lobbying efforts of the FPA, AFA and AIOFP, all of whom have championed various separate measures that have found their way into the government’s final response.
“Ultimately what we all want to achieve is that Australians saving for their retirement, or managing their retirement, have access to high quality advice they can trust and which is affordable,” Senator Cormann concluded today.
If these amendments are successful in helping facilitate this outcome, then it is not only our industry that has had a win, but the taxpaying citizens of Australia.
Lost any money lately….you are right in that the failures have no genesis or birth in the actual politics themselves, however,it is the politics of mistruths,political point scoring and scaremongering that the Labor party has utilised to create a falsehood to the public that “if you are to seek financial advice in an environment of amended FOFA,you will be risking everything because financial advisers are not adequately controlled.” !
This promotion by Labor,supported by their media division, (the A?C),does indeed greatly politicise this space.
@lost any money lately – Who the hell are you to pass judgement ! “Get serious or get out” ? What the hell does that mean? I actually thought Craig Yates had some valid comments. His comments about Craig Thompson are in fact very relevant – because a very large part of FoFA was designed (in part) to protect union affiliated super funds and the whole funding mechanism that provides to the original architects. It was clearly over reach. You are certainly entitled to your opinion, but please allow others to have theirs!!
And believe me – I am very serious !
Lost any money lately, it seems you have a nerve ending of some sensitivity.It’s only an opinion, and we are all entitled to one!
Secondly,when you say “failures of greed”, for someone to have consented to have geared 80% of the equity they have in their own home on the promise or projection of consistent high returns based around the share market are you saying this is not also the consumers failure driven by greed ?
Thousands of people every year voluntarily commit millions to financial scams in the expectation of huge returns and wealth purely driven by greed….and that is without any advice!They do it on their own!
Do you think a poorly structured
product with a high likelihood of failure, based on the product structure and not market downturn should be approved by ASIC to be available to the public or should the process be much more rigorous in an effort to reduce product failure and protect the consumer?
Believe me, I am serious.
Won the battle, but will lose the war. It’s hard to see how this result will increase consumer confidence in financial planning which has been a consistent 25% on the trust scale for over a decade. The industry was asked to self-regulate – it failed; then regulation was imposed – and the industry pushes back. There is hope still, as new entrants to financial services, with no vested interest in maintaining the status quo, will stir up market forces that bypass the existing inefficient financial services value chain. The outcome being – for the majority of consumers – sound advice that meets their needs being created by an algorithm at a fraction of the cost.
I have no confidence the Conservative govt FOFA wind backs are in consumers interest. Craig, if you,like receive feeds from this publisher and others servicing this industry you will receive on a daily basis news of failures, operating bans, warnings from regulators. These failings have no genesis in the politics as you ascribe. They are failures of greed, product design, and sales incentivation. Nothing to do with Peter Slipper, the ABC, or Health Services Union. Get Serious or get out.
Look out for the “Enemy of Financial Advisers”, the tax-payer funded ABC.
From the 7.30 Report, Breakfast television and radio and 4 Corners,it is already a relentless,consistent and biased skewing of reports in clear favour of the opponents of the FOFA ammendments.
In addition, they continue to use the reference to Storm Financial as the pinnacle failure point,a commonly used scare tactic by both Chris Bowen and Bill Shorten to create fear and to dilute and destroy the public’s confidence in seeking appropriate financial advice.
The NSW Labor mess and corruption, Craig Thomson, Kathy Jackson, union standover tactics,secret payments and corruption within the building industry the taxpayer funding Peter Slipper’s legal costs to the tune of $700,000 plus costs! …..wow…they should well and truly be able to hold their heads high as a squeaky clean example of how not to do just about anything!