Gutted FOFA frees conflicted planners

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From Crikey comes a better effort today:

The government’s winding back of the Future of Financial Advice reforms will legalise conduct by financial planners that has long been banned and hand a major win to the big banks and AMP — one that even the Howard government rejected, Crikey can reveal.

…In 2006, ASIC launched an investigation into the practices of AMP’s financial planners, who were recommending clients switch to AMP products without comparing the returns AMP products would offer to the returns of products clients were already using, such as industry super funds, which might have been higher. Clients expecting objective advice about what would yield the best returns or best suit their needs were being told only about AMP’s products. AMP argued its planners’ advice was consistent with the requirement to provide advice in the client’s best interests because it had obtained clients’ consent to confine advice only to what was on AMP’s “Approved Products and Services List”, or APSL. AMP later admitted it instructed its planners.

…ASIC rejected the rationale that clients could agree to narrow the scope of advice so that it wasn’t in their best interests and secured an enforceable undertaking from AMP to end the practice. 

The industry lobby, IFSA, campaigned the Howard government to restore the dodgyness but was rebuffed. Not so now:

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The Sinodinos package, however, includes exactly what IFSA wanted, claiming in the explanatory memorandumthat it will “better facilitate the provision of scaled advice to reduce uncertainty and enable cost-effective scaled advice to be provided to consumers”. The regulations now explicitly provide that there is nothing that “prevents a client from agreeing the subject matter of the advice sought by the client with the provider”. Retail funds and planners will be able to do exactly what AMP was banned from doing.

 This is not complex. It is a straight conflict of interest and should be left unchanged.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.