The government has struck a deal with Clive Palmer to water down the Future of Financial Advice laws.
The FoFA reforms were introduced by the former Labor government and were designed to protect consumers from financial planning fraud.
The FoFA laws originally set out to ban commissions for financial advice, require financial advisers to ask clients whether they wish to continue receiving their service every two years and require financial advisers to act in the best interests of their clients.
But the Abbott government moved to water down the “burdensome” reforms and announced many of the changes would be made by regulation not legislation, meaning there would be no scrutiny by a parliamentary committee.
Yesterday the government changed the FoFA laws through government regulation, despite opposition in the senate.
A last minute deal with Palmer allowed the laws to proceed with the mining mogul-turned-politician extracting some concessions.
Palmer’s four changes are:
- financial advice providers required to act in the best interests of their client and prioritise their clients’ interests ahead of their own;
- any fees to be disclosed and the financial adviser to provide a fee disclosure statement annually;
- clients have the right to return financial products under a 14-day cooling-off period; and
- clients have the right to change their instructions to their financial adviser, if for example they experience a change in their circumstances.
Finance Minister Mathias Cormann says the government will add further changes to the regulations within 90 days.
But opponents of the changes to FoFA, like consumer group CHOICE, say Palmer’s concessions do nothing to offer protection and only impose more red tape.
Erin Turner, campaigns manager at CHOICE, told SmartCompany she is “really disappointed” with the outcome.
“Consumers including small business consumers don’t have protection when seeking financial advice when there has been scandal after scandal of people losing money through financial advice,” she says. “It leaves consumers vulnerable to that happening again.”
CPA Australia chief executive Alex Malley described the changes as “mere window dressing” that will do little to improve the trust and confidence of Australian retail investors in the financial services sector or improve access to advice.
“The proposed additional regulations, negotiated between the government and some minor party and independent senators yesterday, will do little to add to provisions already contained in the Corporations Act,” he said in a statement.
But Brad Fox, chief executive of the Association of Financial Advisers, is happy the changes have passed.
“This has taken a very long time to get to this point and it is a good landing point,” he says. “When the dust settles people will recognise that we have the strongest protection for financial advice in the world.”