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FOFA
Government drops the ball on FoFA
John Hewison
Founder and Director
19 Jun 2014
As an independent advice firm we are absolutely incensed at the Federal Government’s failure to protect the public interest under the review of the Future of Financial Advice (FoFA) reform.
A Senate committee enquiry has delivered qualified support to the government proposed changes to FoFA legislation which we see as a compromise of standards.
We are appalled at the outcome of the government dominated inquiry which has effectively played into the hands of the banking sector to soften the approach to a ban on commissions and incentive payments. It also softens the test of advisers to act in the best interests of their clients.
The key amendments include:
1.Allowing commissions to be paid for general advice
This means that bank tellers, advisers and call centre staff will be able to receive commissions for selling financial products or referring to a bank employed adviser.
2.Changing the “best interest test” that must be met by advisers
This means that the advisers will be able to meet the test without the need to act in or consider the client’s best interests.
3.Removing the requirement for clients to authorise ongoing fees
This means that consumers can continue to be charged ongoing fees but not receive ongoing services.
4.Fee disclosures only required for new clients. That is, pre-existing fees and commissions are not required to be disclosed.
This means that if a client has been sold a product that pays ongoing commission to the adviser, the adviser will continue to be paid without obligation to disclose. However, if the investment is sold the commission stops and cannot be replaced. In this scenario the adviser has a vested interest for their client to retain the investment and is unlikely to advise its sale, regardless of its suitability to the individual!
We are absolutely committed to the belief that the adviser /client relationship is sacrosanct and should be totally focussed on the client’s best interest; free of any external conflict. This must be the cornerstone of a professional relationship. Dealing with peoples’ financial future is important and should not be compromised with any conflict of interest or product related payments to the adviser.
We will continue to agitate for separated licensing of independent advisers as distinct from institutional product and commission salespeople. Someday, the government will see the light and take the hard stance to licensing that is required and in the public’s best interest.
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.