Future of Financial Advice Prioritises Consumers
Investors who receive financial advice will have more protection following the Government's announcement today of further details of the Future of Financial Advice reforms.
Three key elements of the reforms are: a requirement for financial advisers to get clients to ‘opt-in' every two years if they wish to continue to receive ongoing advice; banning all commissions on risk insurance inside superannuation and a broad ban on volume-based payments.
Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said "These reforms are designed to provide further protections for consumers of financial advice and to restore trust in the system following the collapse of Storm, Trio, Westpoint and other financial service providers."
"It will also provide more certainty to the financial advice profession, which has been closely engaged in the consultation process," Mr Shorten said.
"The vast majority of financial advisers are dedicated professionals who give good advice to the best of their ability. But that doesn't change the fact that many consumers lack trust in the profession and there is a perception that advice is under-regulated and open to abuse."
"It is a concern that only one in five Australians seek financial advice. These reforms are designed to encourage those people who have doubts and concerns about the value of such advice, or who have just never thought about it - those other four in five people - to perhaps in the future get financial advice."
"In this sense these reforms can in fact be a growth strategy for the financial planning industry."
Further details of the announcement include:
- A decision to ban all trailing and up-front commissions and like payments from 1 July 2013.
- A broad ban on volume-based payments, targeted at removing payments that have similar conflicts to product provider-set remuneration, such as commissions. This includes those payments based on volume or sales targets from platform providers to financial advisory dealer groups.
- A ban on any ‘soft-dollar' benefit that is $300 or more (per benefit) from 1 July 2012 (excluding professional development and IT administration services where set criteria are met).
In addition, the announcement provides further details on other elements of the reforms, including the best-interests duty, access to advice and the accountants' exemption.
Further details on all measures are included in the attached Information Package [PDF 142KB].
"Since the Government announced the reforms there has been extensive consultation with stakeholders. The Government has carefully weighed and balanced all the feedback provided in consideration of today's announcement. I greatly appreciate the active engagement from industry in the preparation and early implementation of these reforms."
"The Coalition's Financial Services Reform Act in 2001 failed miserably to actually do any good for consumers, because, unlike the Gillard Government, they didn't make the tough decisions on issues like banning commissions and volume rebates."
"These reforms are crucial to further developing the industry and improving the trust and confidence that Australians have in financial advisers. We will continue to consult with stakeholders in the lead up to the release of draft legislation later this year."
"I strongly believe that professional, well-regulated financial advice can be of great benefit to a growing number of Australians and I believe our Future of Financial Advice reforms will encourage more people to seek that advice in the future," Mr Shorten said.
28 April 2011