Fairfax’s Adele Ferguson has taken a big stick to the Abbott Government for placing big business ahead of consumers in its bid to wind-back the Freedom of Financial Advice (FoFA) reforms introduced by the former Labor Government:
The Coalition was always on a kamikaze mission when it decided to back the big end of town over consumers amid a series of financial planning scandals that exposed series flaws in the system.
And so it was when a “coalition of common sense” fronted up to a press conference in Canberra at 9.15 on Wednesday morning with a group of victims to discuss what was about to go down in the Senate.
The message was clear: Labor, the Greens and crossbenchers including senators Nick Xenophon, Jacqui Lambie, John Madigan and Ricky Muir wanted an end to the confusion, controversy and growing disquiet over the implications of the Coalition’s FOFA windback.
It means some of the worst and arguably most potentially dangerous aspects of the Coalition’s reforms – namely general advice and changes to the best-interests duty – are no more…
The cross-bench’s resolve to prevent the Coalition’s FoFA rollback is a win for common sense, and the Australian consumer.
The original FoFA regime, implemented by the former Labor Government, was born out of the collapse of Storm Financial and followed a landmark parliamentary inquiry and three years of negotiations. The Coalition’s bid to wind the reforms back, and re-introduce commissions and other forms of conflicted remuneration, was always a highly retrograde move.
Even many of Australia’s top financial advisers rejected the Coalition’s unwinding of the FoFA reforms, believing they were not in consumers’ best interests. For example, back in June, Rod Dunn, the proprietor of RetireInvest Bondi, noted the following in The AFR:
Dunn believes… institutions paying advisers sales bonuses for pushing products can lead to planners “serving their own interests at the expense of clients”.
…he doesn’t hear “consumers complaining about the current fiduciary requirement to put clients’ interests ahead of your own”. “So why water it down?”…
“As long as there’s an incentive to receive a bonus in addition to the client’s fee… the adviser is shifting away from putting the client’s interest ahead of their own”
Keith Jones, senior partner at Affinity Wealth Services, shared a similar view:
…the only way to truly align advisers’ interests with clients is “to remove all financial incentives associated with recommending products”… “We do not believe in conflicted remuneration – full stop”… advisers should only “charge clients directly for the services you provide”.
As did Robert Shears from Valor Wealth:
“I don’t think there should be any sales bonuses on any advice because it is not in consumers’ best interests”.
About the only group supporting the Coalition’s changes were the big banks, which saw an opportunity to cross-sell their own financial products and earn greater profits.
As noted by Adele Ferguson in a separate article, the Senate’s opposition means that the “original FoFA reforms will remain intact, including the requirements that financial planners act in their clients’ best interests and that advisers have to sign a new contract with clients every two years and disclose the fees they charge each year. It also removes a number of loopholes that would allow the payment of commissions, bonuses, incentives and other benefits based on the amount of products sold”.
We should all be relieved that Jacqui Lambie and Ricky Muir changed their minds and sided with the other Senators to oppose the Government’s demolishing of the FoFA reforms.
