After half a year of political to-and-fro and millions of dollars in lobbying money on both sides of the fence, the government has announced it will push forward with its FOFA amendment agenda, sticking to its guns while tightening its position on the general advice exemption.
This morning Senator Cormann broke the silence from government figures since the release of the Senate committee report on Monday, putting into motion the amendments the Coalition took to the election and has sought to bring about since the very beginning of the FOFA process.
The announcement reiterates the Abbott government’s longstanding position that Labor’s FOFA reforms went too far, and that the Coalition sought a new policy agenda which would “strike the right balance between appropriate levels of consumer protection and ensuring the availability, accessibility and affordability of high quality financial advice”.
In releasing his response, Senator Cormann made clear that the amendments will remain as previously proposed on the best interest duty, hitting out at the “inaccurate assertion that we were somehow abolishing or significantly watering down the best interest duty for financial advisers”.
The minister also lashed out at the “equally inaccurate assertion that we are reintroducing commissions for financial advisers”, propagated largely by the campaign led by Industry Super Australia in cahoots with the Australian Council of Trade Unions and their allies in the Labor opposition front bench.
However, at the same time, the government will introduce additional clarity on the general advice exemption to the conflicted remuneration rules – as recommended by the senate economics committee report – in order to snuff out any criticisms that the amended FOFA allows an avenue for banks or other advice provision parent companies to sneakily reintroduce commission payments.
“The government is moving to put this absolutely beyond doubt by prescribing that any payment related to the provision of general advice cannot be an upfront or a trailing commission,” Mr Cormann announced.
“To put absolutely beyond doubt how serious the government is about not permitting commissions in these circumstances, we also intend to put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration.”
Commenting on the change this morning, FPA chief executive Mark Rantall described this additional clarity by the government as a “removal of the Wolf of Wall Street clause”.
“This gap in the FOFA draft needed to be closed and nailed shut forever by the government,” Mr Rantall said.
“The concept of rewarding sales people on the volume sales of financial products and services in the form of embedded product commissions is a bygone practice and has no place in a professional, client-centric advice world.”
Unlike the senate report, Cormann’s statement today also provides some answers on the crucial issue of grandfathering, indicating some closure to the confusion surrounding these provisions, which advice business owners will no doubt welcome warmly.
Many of the amendments may be implemented via regulation as soon as July 1, including the removal of opt-in and fee disclosure, the removal of the catch-all provision in the best interest duty and greater clarity on scaled advice.
Other measures are set to go before the parliament where the votes of a number of key Senate crossbenchers may ultimately be the decider.
The announcement today is a win for the financial advice industry associations – and in particular the lobbying efforts of the FPA, AFA and AIOFP, all of whom have championed various separate measures that have found their way into the government’s final response.
“Ultimately what we all want to achieve is that Australians saving for their retirement, or managing their retirement, have access to high quality advice they can trust and which is affordable,” Senator Cormann concluded today.
If these amendments are successful in helping facilitate this outcome, then it is not only our industry that has had a win, but the taxpaying citizens of Australia.
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