Late last night the Senate Economics Legislation Committee tabled its report on the Bill amending FOFA, which went back for consultation after Senator Mathias Cormann paused the process following the standing down of former assistant treasurer Arthur Sinodinos.
While the committee majority recommended passage of the Bill, along with some minor clarifications, Labor and Greens senators issued strongly-worded dissenting reports, slamming the decision.
“Labor members of the committee note the majority report’s recommendations 1 and 2 are little more than a piecemeal attempt to fix structural legislative gaps and failures using the explanatory memorandum,” said the dissenting report penned by Senators Mark Bishop and Louise Pratt.
“Labor members of the committee believe that the Bill in its current form is beyond repair and should be opposed. Furthermore, the government should abandon any attempts to rush in, again, a new set of regulations that in effect gut the FOFA reforms ahead of introducing new legislative charges.”
In addition, the ALP senators called for the reintroduction of measures to “restrict the use of the terms ‘financial planner’ and ‘financial adviser’” as well as calling on the government to change the term ‘general advice’ to ‘general information’.
Meanwhile, Greens Senator Peter Whish-Wilson also recommended the Bill not be passed, as well as coming to the defence of the industry super fund sector.
“It was disappointing that during the conduct of the hearing the government’s line of questioning particularly targeted the conduct of Industry Super Funds, something that was outside the inquiry’s scope,” Senator Whish-Wilson wrote.
He also took aim at the “larger financial institutions” operating in the financial advice space, claiming the Greens are on the side of small business advisers.
“The Greens spoke to a number of smaller financial planners prior to the inquiry and acknowledge that feedback on the suite of amendments was mixed,” he said.
“We acknowledge concerns by some smaller financial planners around ‘potential’ uncertainty from the “catch all provision” and higher compliance costs from various other FOFA reforms (such as opt-in clauses) but we feel that these need to be carefully weighted against expected benefits to both consumers of financial services and the financial services industry.”
Agreed Gerry, the rot is at the top. However, if manufacturers didn’t own distribution (whoops, sorry “[i]Advice Practices[/i]”), then the client could get the honest, impartial, unconflicted,independent advice they need and deserve. Large dealer groups could still have the AFSL and do admin etc., but the APL could be honest.
Imagine what would happen if drug companies started to buy up Medical Centres and their “drug APL” just had house product (with, of course, all the PI covering justifications in the file)!!
The only way you can give unconflicted unbiased advice is to get your own AFSL and create your own APL using your own research or subscription only research. An institution or dealer group will not allow open APLs period. That’s a pipedream, not to mention a PI issue.
And because for most advisers, owning/operating their own AFSL is not viable…they will forever be controlled by an entity. Doesn’t mean the advice will be substandard…but it will never be unrestricted. How many times do we see dealer groups creating their own product so they can clip a margin, and they’re pretty good at manipulating the APL to accommodate their new inhouse product. The rot is at the top.
Right on the money Steve !!….its the only way to give real, independent, unconflicted advice. I would add that APLs need to be truly open; not “pretend” open and stacked with house product.
BTW TD, I am not an accountant and was saying they the should NOT be giving any investment advice even though they are already not supposed to without an AFSL.
And Gerry, while we certainly didn’t [i][b]cause[/b][/i] Timbercorp’s collapse, we acted as a paid sales force for them.
Let’s just get fair dinkum and put a blanket ban on commission and kick backs in any form in relation to either advice or product sales.
I’m with RoE on this one. If we’re going to be held collectively responsible for financial product failures, we have to collectively take that responsibility, improve, and self-reflect.
Every advice failure is our collective responsibility. “Well it wasn’t me, it was one of the dodgy members of my community” does not inspire public confidence.
You people commenting don’t even realise that you’re slagging off at the advice industry. I never sold agri…it was accountants blah blah. The bad stuff happened way up the corporate tree, dealer group kickbacks, independent researchers getting paid for ratings (I mean marketing), bad management, drought…did I mention a GFC?
You’re all so self interested. Just admit, it was an investment failure…many people and market factors involved. Unfortunately every investment failure seems to find its way back to financial advisers even if they aren’t involved or didn’t cause it. Did we (generalised term) cause the failure of Timbercorp by the way?
Who trained you Melinda? One of the bank-aligned licensees by any chance?
I was trained and pushed to sell AgriBusiness as an Adviser at that time also.
However I never did as the risk and long term structure did not justify a tax saving in my opinion for my clients. That is the difference between advice and product sales. Many advisers I know were also not interested in Agri, so don’t generalise us all or even most Return on Equity!
@Return on Equity…Who is ‘WE’ Why the insistence on the use of the word ‘WE’. Obviously as an Accountant without an AFSL YOU enjoyed the kickbacks. Time to stop hiding behind the moniker of adviser/financial planner as a means of deflection from your true position.
Another fair point Andrew. Also goes to the other issue about why accountants without AFSL should not be giving investment advice, but we all enjoyed the kick-backs.
But, Return to Equity I think the point being made is that the accountant didn’t even get a mention only the words financial planner.
In my home town were these schemes were used extensively 95% of them were promted by accountants yet I never hear their profession being questioned.
Fair point BMac….I was generalising, and the facts are that most advisers were pushing these schemes, but obviously not all to a man. As an industry we were in it up to our necks and sadly being one of the few that didn’t drink the Cool-Aid doesn’t somehow cancel out the systemic problem.
@Return on Equity….think you need to slot in ‘I was’ rather than ‘We were’ in your post. You don’t speak for me.
You cant just blame the accountants!! We were all drinking the Cool-Aid and Financial Planners were enjoying the large kick-backs as well, and using the same “deduction” justification. As usual, the problem is with conflicted remuneration and the sooner the Govt grow some and really get rid of it the better, particularly for the poor punter.
The ABC 730 report last night demonstrated the bias and sensationalism that now defines the ABC journalism. Why should our tax payer funds support this ? Bottom line – take away their gov funding and let the ABC garner their own financial support to support their spin- this will also make it clearer for the average viewer to understand the bias in their views.
All of the Agricultural schemes were pushed by accountants for the “deduction”, not to mention the big commission they received at the time. Why has this been forgotten?
Just watching the ABC regarding FOFA on 7:30. How on earth did Timbercorp and great-southern get sheeted home to financial planners and why are they allowed to run this bogus line. I’m completely disgusted that this is laid at our door and used as part justification for FOFA. The guy they highlighted in the programme as one of the culprits was an Accountant for heavens sake yet interchangeably they slot in the term financial planner. It was a tax driven strategy from accountants. We are getting dudded big time as another profession side steps their culpability. Am I Missing something.
Neil, i hear ya but the reality is all these updates are necessary to see what exactly our obligations are. the more coverage supporting the amendments – like you will see on this site and few others – the better our chances of getting them passed.
Sorry, but I really am FoFA’d out (aka punch drunk). Is this ever going to end ?
I’m with you Steve. Calling the supply of information advice muddies the issue. Advice is advice not the supply of non specific information.
I like the term “general information”