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The Future of Financial Advice (FOFA)

What is FOFA – and is it a silver bullet?

John Hewison
Founder and Director
14 Aug 2013

In last week’s blog, we introduced readers to Hewison’s recent discussion paper about the financial planning process. Click here to download the full paper.

This week, we delve into the regulatory reform that kicked on 1 July this year.

The Future of Financial Advice (FOFA) package is essentially the Government’s reform package to improve the provision of advice to retail clients. When the dust settled on the GFC, it became clear that many financial planners had provided questionable – or downright bad – advice to their clients. Some planners had recommended products based on the hidden commission they’d receive, while others – notably Storm Financial – used the banks’ willingness to lend to set their clients up with disastrous margin loans. In the case of Storm’s clients, when the margin calls came, many of these people lost all their assets.

But that is the disaster end of the scale. More often than not, the issue is that clients don’t receive the best possible advice, or are charged fees and commissions that don’t reflect the value of the advice they receive.

According to Treasury, the key elements of the FOFA reforms are:

Despite much protest and debate within the financial services industry, these reforms are positive for consumers, as they enshrine good practice and ethical behaviour. And while they should have always been the minimum standard for providing professional financial advice, they are certainly not the silver bullet for making the industry transparent and unbiased. This will only happen when product sales are completely untangled from advice, and there is no connection between the two.

The FOFA reforms are nothing more than what any reasonable person would expect when they place a high level of trust in their planner. Any client would expect that their financial planner would act in the client’s best interests, or that their recommendations would not be influenced by gifts or rewards from a product provider.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.