The Federal Government’s highly-anticipated financial planning package has been met with a mixed response, with planners concerned the changes could increase costs for consumers.
Assistance Treasurer and Financial Services Minister Bill Shorten has unveiled further details of the Government’s financial planning reforms, which require financial advisers to act in the best interests of their clients.
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Meanwhile, clients are required to “opt in” for advice every two years rather than allowing the service to click over year after year.
The Government will also seek to ban volume-based payments to planners from financial institutions from July next year.
Commission payments to planners on life insurance policies, provided through super funds and soft-dollar gifts of $300 or more, are also banned under the package.
Shorten says the changes are designed to boost consumer confidence in the sector, following the collapse of various financial service providers, in addition to providing certainty.
“The vast majority of financial advisers are dedicated professionals who give good advice to the best of their ability,” Shorten said in a statement.
“But that doesn’t change the fact that many consumers lack trust in the profession and there is a perception that advice is under-regulated and open to abuse.”
The joint accounting bodies – CPA Australia, The Institute of Chartered Accountants in Australia and the National Institute of Accountants – have described the process as a “significant and positive next step forward in the provision and delivery of high quality financial advisory services.”
“The removal of conflicted remuneration structures, including commissions and volume-based payments, is a vital step towards eradicating conflicts of interest within the industry, and will strengthen consumers’ confidence in the financial advice they receive,” the group says.
CPA Australia head Paul Drum says the package is “probably the biggest shakeup of the financial services sector for the past 30 years”, ultimately delivering more affordable advice.
But the Financial Services Council – which represents retail and wholesale funds management businesses, super funds, life insurance and financial advisory networks – says while the package is better than expected, it could still increase costs.
“While financial advice will be of a higher quality, the reforms will force up the overall cost of advice to consumers,” FSC chief John Brogden said in a statement.
The Association of Financial Advisers has also slammed the package, saying consumers have a bigger problem with paying fees upfront than trailing commissions.
AFA chief Richard Klipin says the package could result in the percentage of Australians seeking advice fall from the current level of 20%, and accuses the Government of favouring industry over consumers.
“While it might be a victory for large superannuation funds and the superannuation lobby cheer squad, it is a dark day indeed for ordinary Australians and their ability to access affordable advice,” he said in a statement.