Media Release

FoFA heading in the right direction but clarity still outstanding

Media statement issued by the Joint Accounting Bodies

(CPA Australia – Institute of Chartered Accountants in Australia – Institute of Public Accountants)

The release of draft legislation on the Future of Financial Advice (FoFA) reforms has confirmed that a decision on the accountants’ exemption will be announced in the second tranche of the package.

Earlier today Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, released the first tranche of FoFA draft legislation which represents a critical next step to ensuring the provision of high quality financial advisory services.

The replacement of the accountants’ exemption is a vital component to the federal government’s reform package, which is designed to increase consumers’ access to financial advice.

The Joint Accounting Bodies – CPA Australia, the Institute of Chartered Accountants in Australia, and the Institute of Public Accountants (JAB) –  represent more than 200,000 professional accountants and are integral to increasing consumers’ access to professional advice.

Only one in five Australians currently access financial advice, which highlights the importance of getting an appropriate alternative to the accountants’ exemption to ensure greater community access. A satisfactory replacement to the accountants’ exemption would also give professional accountants scope to provide ‘non-product’ financial advice to clients.

Today’s announcement aligns with the government’s commitment made in April 2010 to improve trust and confidence in the provision of financial advice.

The interests of the client must be paramount, above and beyond those of the planner or the licensee. The draft legislation, when implemented, will be critical in ensuring client interests are best served.

The inclusion of the two year ‘opt-in’ requirement and an annual fee disclosure notice will ensure transparency in the relationship between a financial planner and client, and will also encourage consumers to be more actively engaged in their financial future.

Since 2005 the JAB has had as a professional requirement of members that they report all fees and charges to clients on an annual basis.

With an appropriate transition period, the accounting bodies believe that the result of the proposed changes will be higher quality and greater access to financial advice for consumers.

The JAB has long supported the removal of conflicted remuneration structures and ensuring that advice provided to consumers is in clients’ best interests. The removal of such conflicted structures, including commissions and volume-based payments is a vital step towards eradicating conflicts of interest within the industry, and will strengthen consumer confidence in the quality of financial advice.

Article last Updated 31 August 2011