Reflecting on the debate surrounding the announced changes, Association of Financial Advisers chief executive Brad Fox said the mainstream media and other stakeholders have been peddling misrepresentations of the truth.
“The mainstream media’s reporting that the amendments will strip out the best interests duty is the biggest fallacy and misrepresentation of the truth around,” Mr Fox said.
“[The amended package] does not get rid of the best interests duty – it is simply creating a best interests duty that will work in practice and work for clients as well as make sure advisers know the boundaries better”.
The claim is an example of the “absolute rubbish” being written by “well-known reporters and media outlets”, he said, calling on advisers to “ignore the static” and issue personal communications to clients refuting the claims.
While Mr Fox did not single out specific media, an article by Australian Financial Review political editor Laura Tingle suggested the proposed amendments seek to “overturn virtually all of the former Labor government’s reforms to the financial planning industry”.
Asked whether stakeholders other than the media should take responsibility for perpetuating the myths – for example Industry Super Australia’s statement responding to the proposed changes said the move would “re-open the debate about whether a financial planner is an impartial adviser or sales rep” – Mr Fox said the whole debate is beholden to vested interests.
“There are a lot of agendas at play here. All of these issues relate to one of the world’s largest superannuation pools – and the competition for that money is pretty fierce,” he said.
Mr Fox also rejected shadow treasurer Chris Bowen’s Twitter claim that the proposed amendments will make “another Storm, Westpoint or Trio collapse more likely”.
“It is politically convenient to say that the amendments will create another Trio, but it’s simply untrue,” Mr Fox said, pointing out that “product failure” is the true reason for the fund manager’s collapse, and that the Murray inquiry, not FOFA, is the appropriate vehicle for dealing with that issue.
Oh dear Gav… The client knows best what they want to know and need to know and a newsletter providing GENERAL advice does that more than adequately. It’s NOT free and it can and does target areas of concern (eg Q and A) so it works for me (leveraged “advice”; at low cost) and them.As an AFSL holder AND a responsible manager to another AFSL holder I an VERY well versed in the legal requirements, whereas some respondents here are simply being reactionary. I have obviously touched a nerve with those who are afraid… with good reason, whereas those who are fee-based and without conflicts (I agree, that’s getting to be a majority other for the swathe of institutionally owned) have little to fear – as do their clients. Enough said. Those who want to rant at the obvious problems of their own causing are fre to do so without my input from here. Good luck – you’ll need it! Over and out.
“weekly newsletter that explains how super, insurance, estate planning etc work and what they need to do” – How do you retain your license?
Know your client rule -Failed
Provide advice in the Best[quote name=”Philip Carman”]I understand FOFA very well (Gav and In Favour) AND I also understand that the young and less well-off need advice. I provide it to them for as little as $200 pa (weekly newsletter that explains how super, insurance, estate planning etc work and what they need to do)[/quote] Can you explain how this is advise that meets “Best Interest?” Especially since they can get this ‘general information’ off the internet for free…
aah Philip such an angel, must get hard to breath sometimes being up that high
Philip Carmen – Bagging your own profession in a crude attempt to promote your own business is quite unsavoury. I too have worked in this profession for a very long time, and it has been my experience that the vast majority of financial planners are good people who have always acted in the best interests of their clients. Ironically, your post proves one of the points Brad Fox was making. Criticism of the FOFA amendments is coming from self-interested parties with an agenda.
I understand FOFA very well (Gav and In Favour) AND I also understand that the young and less well-off need advice. I provide it to them for as little as $200 pa (weekly newsletter that explains how super, insurance, estate planning etc work and what they need to do)and as little as $880 pa for personal advice and mentoring, right through to much higher fees for those who don’t wish to take responsibility and who want the “deluxe” service. What it seems too few advisers understand is the need to be flexible and provide a range of fee options. I allow clients to pay monthly or quarterly and so it’s an affordable service and I TEACH them how to DIY, so they can use me as a mentor, and have control of their own destiny. How about some of you getting in touch with what consumers want rather than simply braying about your own sorry lot? Self-interest has its place, just as do apostrophes! Advisers need to demonstrate that they put their clients’ interests first, not just talk about it.
Well said Mr Fox. But where is the FPA on this? Recent articles in the mainstream press have been littered with exagerations and blatant untruths. The level of ignorance and political game playing on this issue is beyond belief. Our profession is being tainted and defamed. I expect a strong response from the FPA. No other profession would stand for this kind of reckless attack designed to score political points and sell a few newspapers.
(Continued) There is a place for both commissions and for fee’s to be paid. Remember that Australia’s population has a significant number of migrants who come to our shores and they simply don’t have the available funds to pay upfront for financial advice. Does that mean they don’t have the right to receive advice? Surely they are the one’s who need it most. The same can be said of our youth. Get them on the right footing financially from the start before they get lured by advertising into financial debt over vehicle loans and unaffordable mortgages!
Oh dear!!
Philip, it’s great that you have clients that can afford to pay your upfront fee for service. What you clearly fail to understand is that FOFA is designed to make advice accessible to ALL Australians. This means that there is a place for clients who CHOOSE to rather have a third party (the administrator or Insurer) pay a fee or commission to the adviser for the advice and service given. This is something that is the CHOICE of the consumer and should never be prescribed to by regulators.
There will be advertising and the like informing clients that they can switch off commissions and fees and clients will have the choice to do that too. Yes, some clients are so disengaged that they will do nothing but to assume ALL clients are disengaged and then enact regulations based on this assumption is simply wrong. It’s like banning all men from going to nightclubs because some miscreant spiked a drink or started a fight. (Continued)
commissions for general advice and insurance within super are proposed to be wound back but currently under the FOFA regime a client would struggle to obtain advice on their overall options as advisers would be forced to charge the client to have any kind of discussions with the client before personal advice is even provided to the client. This disadvantages the consumer as it creates a large and expensive regulatory burden on the provision of general advice to consumers.
advisers who are providing personal advice on insurance within superannuation will have an exemption to receive commissions which is in line with insurance outside of super and assists in ensuring the underinsurance gaps for consumers in Australia continues to be adequately addressed. Again the proposals are to assist consumers.
Philip – the proposed amendments are not to wind back the ban on conflicted remuneration. The ban on commission is still in place. I hope you know more about giving appropriate advice to your clients than you do about FOFA.
Mr Fox’s attempt to protect his and his colleagues’ interests, will fail to gain the public’s trust (which is the prize at stake here). He should be less contemptible of reform, less party-political (his association is unashamedly pro-Coalition and their promise to claw back reforms) and more willing to embrace – perhaps even shape – regulation.
Let’s remove ALL payments from third parties (fund promoters and issuers – otherwise known as commissions) to “advisers”. The corollary is that all advisers should charge fees-for-service.
How anyone can call themselves an adviser when they are paid by the product issuer for sales bamboozles all but those who continue to suckle at the commission teat. This issue will NEVER go away until people like Mr Fox wake up and smell the coffee. As a 25-year fee-for-service adviser I can attest to its efficacy as well as to its full transparency, and zero conflict of interest.
Another inaccurate claim in another publication which I’m never reading again was that the government was rolling back the disclosure of ongoing fees. NO the government is rolling back the requirement for FDS’s for existing clients because it is a regulatory burden which takes advantage of the consumer. The ongoing fees are already disclosed to the client in the FSG and advice document. The FDS is misleading because it does not accurately reflect what the client is paying, it does not match what is in the FSG or advice document and the cost of producing the FDS is passed on to the consumer.
The reality is that the existing FOFA reforms significantly disadvantage the consumer and the amendments assist consumers in accessing advice. I read an article which made the claims that Best Interest Duty was being wound back.It was inaccurate and extremely misleading. One step in the safe harbour is proposed to be removed because it makes no sense to be there – being the ‘catch all clause’. The ‘conflict priority rule’ which is putting the client’s interest ahead of your own has not been proposed to be removed. There is not one proposal from the government that will disadvantage the consumer and in fact all of the proposed changes will significantly improve the consumers ability to access financial advice.
Any assertions that there will be a lowering of best interest duty is just garbage. As any member of the professional bodies will attest, compliance enforces the fact. So any grub mouthing off for political gain or otherwise is showing a complete lack intelligence and making statement without fact. informed consumer-take note.
Oh Dear “Informed Consumer” you are a player with a clear conflict of interest, whilst i realise its a waste of time commenting on your clearly tainted views it is sometimes difficult to ignore. Maybe it’s just a gee up and you are not real, just created to invoke responses because no one could really endorse your comments, no one with any shred of understanding of the issues that is!!!!!
The advice industry should hang their heads in shame – they have chosen NOT to become a profession with the rollback of the FOFA reforms – instead they want to remain a bad joke hurting consumers – collecting trail commissions and giving advice biased in favour of their own hip pocket – what an emabarrassment to our financial system! Get me an accountant quickly!
Let’s not forget that Trio was a fund manger fraud not a product failure. Changes to FOFA laws re financial advisors won’t stop another fund manager fraud only better focus by both APRA and ASIC on fund managers will stop fraudulent find managers.