The financial planning sector in Australia has won a major battle to blunt the government’s reforms aimed at restoring trust in the financial services sector.
The government has made a significant change to the hotly contested ‘opt-in’ provision of the Future of Financial Advice (FoFA) reform, which dictates that advisers must ask their clients regularly if they are happy to continue paying for their services and receive affirmation back that they do. Advisers, who seem to fear that clients will not value their services enough to keep paying, have heavily attacked this clause.
In the end, the government has allowed those financial planners, who sign up to a code of conduct monitored by the Australian Securities and Investments Commission (ASIC), to avoid this regulation. This is a clever move as it means that clients of compliant advisers will not get regular reminders from their financial planners that they are paying for a service; a reminder which might actually make them reflect on the quality of the service and actively decide whether to continue or not. Instead, ASIC will be the arbiter of good quality advice and some clients will remain paying for something that they don’t really want.
The disclosure documents have also been pared back, with financial planners no longer having to reveal future fees and charges.
All in all, it’s a good day for the rogue financial planning sector and a bad day for both the professional financial planners and for the consumers. The teeth have been pulled from the FoFA legislation and all they are left with is a ban on commission, which is delayed because it is far more complex than was originally considered.
On top of these changes, the government have pushed back the start of the FoFA reforms by a year. Yes, they dressed this up as it being ‘voluntary’ for the first year, but effectively that’s just window-dressing. After all, there was nothing to stop any firm operating in a FoFA compliant way for the last two decades; it’s just that nobody wanted to.
It would be nice to think that the above score was a half-time score and that there was the possibility of a comeback, but, given how quickly the government has surrendered to pressure from the financial planners, we might as well leave the stadium now and wait for a rematch, possibly with a different referee.