Missing piece in FoFA reform puzzle

Key Points

• Assistant treasurer and minister for financial services and superannuation, Bill Shorten, announces first tranche of FoFA draft legislation
• The announcement confirms that the replacement to the accountants’ exemption will be addressed in the second tranche of the draft legislation
• The Institute is in support of the ‘opt-in’ and best interest proposals contained in the draft legislation, but an appropriate alternative to the accountants’ exemption is needed to achieve the government’s overarching objective to increase consumer access to financial advice.

The release of Future of Financial Advice (FoFA) draft legislation has only addressed part of the puzzle with confirmation that a decision on the accountants’ exemption will be included in the second tranche of the package.

Key components of the draft legislation include opt-in provisions, the best interest duty and increasing powers within the Australian Securities and Investments Commission to enforce changes under the reforms.

The Institute supports the announcement last month by Assistant Treasurer and Minister for financial services and superannuation, Bill Shorten, to introduce a two-year ‘opt-in’ requirement and an annual disclosure notice that will ensure the relationship between a financial planner and client remains transparent and clients are appropriately engaged with their financial planner. In addition, clarification of a “best interest’s duty” confirms the overarching responsibility for financial planners – placing their client’s interests before their own or their licensee’s.

The Institute has many members and practices involved in the provision of financial planning services that will need to address the implications of these reforms. However, according to the Institute’s CEO, Graham Meyer, the absence of a replacement for the accountants’ exemption is the missing link in a reform package designed to increase consumer access to financial advice.

'The Institute has been strongly advocating that consumers should be able to access consistent, affordable financial and tax advice from their choice of appropriately qualified, experienced professional advisers across the financial services industry,' Mr Meyer said.

The federal government originally committed to providing the Australian public with improved trust and confidence in the financial advisory sector in April 2010.

Article last updated 30 August 2011