The Australian Federal Government is proposing to make changes/rollbacks to some of the new FOFA (Future of Financial Advice) legislation for Financial Planners. If the changes get through parliament, what are the consequences faced by consumers obtaining Financial Advice?
The proposed changed come under the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 (FOFA).
The biggest consequences consumers will notice will be the reduction of ongoing paperwork. The bulk of the changes will have a larger effect on the financial advisors by reducing the impact of the current regulations.
As of 24 March 2014 these changes are on hold
The current FOFA changes have been put on hold, in these circumstances consumers will see no changes until the implementation is revived.
In summary the changes are
- Remove the opt-in requirements
- Remove the retrospective application of the fee disclosure requirement
- Remove the catch-all provision
- Clients and advisers will be explicitly allowed to agree on the scope of financial advice to be provided, whilst ensuring advice is still appropriate for the client.
- The ban on conflicted remuneration will only apply to commissions on risk (life) insurance products inside superannuation in circumstances where no personal financial advice about these products has been provided
- Benefits relating to the provision of general advice will be exempted from the ban on conflicted remuneration.
- Introduce a causal link into the exemption so that benefits are permitted where no advice has been provided to the client by the individual performing the execution service in the previous 12 months.
- Broaden the existing training exemption
- Amend the drafting of the ban on volume-based shelf-space fees to clarify that incentive payments between fund managers and platform operators for preferential treatment of certain products on the platform "shelf" are banned.
- Amend the existing grandfathering provisions, that exempt certain benefits under pre-existing arrangements from the ban on conflicted remuneration, to allow advisers to move between licensees and to continue to access grandfathered benefits in certain circumstances.
- Amend the conflicted remuneration provisions to: allow for the payment of benefits under "balanced" remuneration structures; expand the basic banking exemption to include all simple (i.e. "Tier 2") banking products; and permit the payment of performance bonuses that are calculated by reference to remuneration which is exempt from the ban on conflicted remuneration.
- Amend the existing stockbroking-related exemptions to: clarify the application of the stamping fee exemption to initial purchasing offer arrangements; and clarify the application of the brokerage fee exemption to products traded on the ASX24.