ISA chief executive David Whiteley said that in seeking to cut red tape, the government has not adequately taken into account the potential costs to consumers and the industry from re-permitting commissions through general advice and weakening the best interests duty.
“In one fell swoop, supposed red tape savings for businesses could be far outweighed by consumer losses and reputational damage to the industry itself,” Mr Whiteley said.
“Under the changes, commissions could once again silently erode retirement savings to the tune of hundreds of millions a year and reduce competition on the basis of product merit.
“The reduction in savings will have significant impacts for long-term age pension expenditures.”
While ISA welcomes the removal of the measure which would have permitted commissions on group risk insurance in super, Mr Whiteley stressed that many problems remain, most notably the repeal of opt-in requirements designed to keep advisers engaged with clients and protect consumers from paying for advice which they don’t receive.
“The proposed changes to the best interests duty contained in the Bill will mean that there will be no requirement to act in the client’s best interest in order to satisfy the legal test,” he said.
“The changes to the scope of the general advice exemption are minor and will still permit the payment of commissions on compulsory super, including MySuper products.”
Mr Whiteley suggested that rather than rushing to debate the Bills, government should bring together key stakeholders to find a sustainable outcome that reduces compliance costs without compromising key consumer protections.
“Such an outcome is achievable if common sense prevails,” he said.
“In particular, we continue to hold significant concerns about the government’s apparent determination to give immediate effect to these measures ahead of any parliamentary scrutiny.”
Grahame Evans has a great point – How many people in this industry would even know what ‘best interest’ means under the present Sec 961. Indeed, it would take the first test case, or even a number of cases to work it out.
Clearly, totally unacceptable.
The removal of the catch all part of Sec 961 doesn’t water down the fact that the industry is entirely focused on meeting its Best Interest duty.Everything we do , discuss, implement and put forward centers around this responsibility. To have a a catch all that no one knows how you will comply until the first legal case, is unacceptable to any industry.
Whilst I was keen for a change in Government , I can’t say that these changes to FOFA would be high on my list of the issues that need resolving for a better financial services industry.
Personally I would like to see clear definitions of independent and tied advice. It is clear that consumers want independent advice but find if difficult to distinguish between advisers working for an organisation or the client.
Appears David Castle has neither read or understood what the changes are. If you take what is printed in the media by vested and opposed interest as gospel, is it any wonder you would come to this conclusion. To fully understand the changes and appreciate its implications you need to look at little further than just a headline written for you by Mr ISA.
Just another excuse for the Industry Funds (and others) to get their message out there. The facts don’t seem to count for anything in this debate. Unadvised clients are more likely to buy newspapers, invest in industry funds, accept unlicensed advice from their accountant and subscribe to investment newsletters. So we are being attacked from all angles. Fortunately our clients know better and they see through this garbage. All power to the Coalition. Thank you for honouring your election promises and listening to us.
Agreed, any watering down of the best interests duty is highly unprofessional & undesirable
What else would Mr Whiteley say !?