Responding to claims made in numerous mainstream media reports and by shadow financial services minister Bernie Ripoll that the proposal to exempt “general advice” providers from FOFA’s conflicted rem ban constitutes a “loophole” watering down consumer protection, AFA chief executive Brad Fox said the notion was “totally misconceived”.
“The interpretation of the FOFA Amendments relating to general advice have been reported as meaning that financial advisers will provide general advice in order to be able to receive conflicted remuneration,” Mr Fox said. “These claims are a misinterpretation of the purpose of the draft FOFA amendments.”
The provisions pertaining to “general advice” are only relevant to salaried bank and call-centre “advisers”, not holistic retail financial planners, unlike what is being misreported in the mainstream press, Mr Fox said.
The exemption has long been part of the Coalition’s pre-election financial services policy platform, he added.
However, the FPA has a very different take on the matter, coming out strongly against the proposed general advice exemption.
Speaking at the recent Financial Advice in Super symposium in Melbourne, FPA chief executive Mark Rantall reiterated Bernie Ripoll’s concerns about the “creation of a loophole under general advice and execution”.
“Don’t get me wrong, I’m OK with general advice and if you want to build a bonus structure to help create more advice for Australians and provide them with general advice…I’m ok with that,” he said.
“But if it means bringing back commissions and it provides a loophole that will be applicable to everybody and you can drive a truck through for execution and general advice that’s the one we should be debating.”
The AFA is deluded if it thinks the yawing gaps in the government’s proposed wind-back of FoFA wont incentivise and drive behaviors and structures that will result in a commission feeding frenzy. In turn this will leave hapless consumers’ super and life insurance tickets well and truly clipped!
At least the FPA is honest enough to admit this is a probable consequence of these retrograde moves.
I have saved a copy of this article and promise to send it, and the newspaper clippings that will report the next Storm Financial debacle that this FoFA ‘reform’ will inevitably trigger, to the AFA, ASIC and Sen. Sinodinos. I’ve purchased the stamps…now just waiting for the train wreck.
Let’s be fair and accept that just maybe FPA & APA are not disagreeing but rather highlighting different aspects of what a change might look like if not done correctly?
I think everyone would agree that we don’t want to make it impossible, or just too hard, to give practical advice out of fear that it might inadvertently breach some law. The genuinely honest advisers do care about breaking the law and try to comply. The others don’t care and no law is going to change that.
Disclosure is more important then remuneration basis. Investors need to know whether the adviser is working for them or the recipent of their investment funds. Bank tellers and call centre staff are clearly working for their employer. Banks should be required to disclose beneficial ownership wherever it occurs so consumers at least know who is potentially paying the bills when they chose to invest.