Industry Super Australia chair and former NSW Liberal leader Peter Collins has laid out his organisation's plans to vigorously oppose the government's amendments to FOFA over coming weeks.
Speaking to an audience comprised primarily of industry fund advisers at the ISA-hosted Financial Advice in Super Symposium in Melbourne on Friday, Mr Collins said the proposed amendments to FOFA represented an “effective repeal of the best interests duty”.
Just as doctors and lawyers have an obligation to put their clients' interests ahead of their own, so do financial advisers, he argued.
“We thought, with the passage of FOFA legislation and associated work to further raise professional standards, it seemed that financial advisers had commenced a similar evolution,” said Mr Collins.
The most commonly cited reason for the changes, 'reducing red tape', is disingenuous, Mr Collins said.
“The changes proposed by the Abbott government to the best interests duty are not minor tweaks to remove unnecessary red tape,” he said.
“I come from the Liberal side of politics. I've spoken about removing red tape in the past ... You can't confuse removing red tape with removing legal rights and protections.”
Instead, the changes will equate to “an effective repeal” of the best interests duty, he said – with the remaining six steps in the duty “failing to mention any requirement to consider the client's best interest”.
The result of the amendments will be that the “legal minima” for financial advice in Australia will be “lower than it's ever been in the past”, said Mr Collins.
“Never before have financial laws permitted a planner to avoid responsibility for poor or self-serving advice if the client has agreed to the scope of the advice provided,” he said.
The ISA will take a “very strong stance” on the issue in the weeks ahead, said Mr Collins – particularly when it comes to the manner in which the government intends to enact the amendments.
Any changes to the FOFA legislation – which has been four years in the making – should take place after proper parliamentary debate and not via regulation, he argued.
In addition, there is presently “a very live and current question regarding the extent of the government's regulation-making powers within the FOFA legislation”.
“[This] leaves the industry highly exposed should it rely on regulation which proves to have exceeded the executive's delegated powers," he said.
"So, going down the path of regulating these amendments will create, rather than prevent, uncertainty.”
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