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Call for ‘opt in’ to be replaced with ‘opt out’

The Governance Institute has lodged a submission with Treasury calling for the introduction of an “opt out” mechanism for financial advice clients.

The institute – an industry association representing chartered secretaries, risk management professionals and governance advisers – has opposed the government’s proposed amendments to FOFA, including the removal of the ‘opt in’ requirement.

“Removing the ‘opt in’ requirement gives the adviser full control over the advising relationship while the consumer has no power at all to assess if the ongoing arrangement suits them,” said Governance Institute chief executive Tim Sheehy.

However, anticipating that the removal of 'opt in' may become a political reality, the institute has recommended a substitute requirement.

“If the ‘opt in’ rule is abolished, the government should at least consider replacing it with a less onerous alternative whereby clients are allowed to ‘opt out’ of the relationship when the fee arrangements are disclosed in their periodic renewal notices,” Mr Sheehy said.

“Disclosure at renewal time is already required, so the small step of adding an ‘opt out’ mechanism would not be a compliance burden.”

Mr Sheehy added that the best interests duty ‘catch all’ provision should be retained but amended to ensure financial advisers are protected against “unreasonable claims”.