Parliamentary Joint Committee urged to adopt right policy outcomes

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Key Points

  • The Future of Financial Advice reforms must deliver the desired policy outcomes, say the Joint Accounting Bodies (JAB)
  • Best interest duty should be extended to include both retail and wholesale clients
  • The JAB recommends a start date of 1 July, 2013.

The adoption of proposals contained in the Future of Financial Advice (FoFA) draft bill should be to the benefit of consumers seeking financial advice and build greater trust and confidence in the sector, according to the Joint Accounting Bodies (JAB).

The JAB made the comments at a recent Parliamentary Joint Committee (PJC) hearing which detailed key elements of the FoFA reform package, including the best interest duty, opt-in and annual disclosure statements, and conflicted remuneration structures.

The Institute’s Head of Financial Advisory Services, Hugh Elvy, appeared before the PJC, arguing that while the JAB supports the guiding principles of the FoFA proposals, there are elements of the draft legislation on opt-in and best interests that must be addressed to ensure the right policy outcomes occur.

'There are some hard decisions to be made on how the financial advice industry should operate, but consumers fundamentally need and want trust in their relationship with a financial advisor. There has to be clear, concise and transparent information to ensure consumer engagement and confidence in the industry,' Mr Elvy says.

The JAB supports the best interest duty, where the interests of the client are above those of the advisor and their associates. In its presentation to the PJC, the JAB indicated it believes there should be an extension of the best interest duty to wholesale clients.

'A professional financial planner should always act in the best interests of their client whether they are retail or wholesale clients. Best interests should be an embedded behaviour and duty at all times,' he says.

The JAB recommended to the PJC a start date of 1 July, 2013 for all FoFA proposals, as opposed to the existing commencement date of 1 July, 2012.

Article last updated 31 January 2012

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