Government urged to stay the course on financial advice reform

CHOICE, ACOSS, the Consumer Action Law Centre and Industry Super Network today called on the Federal Government to ‘stay the course’ and fully implement the “Future of Financial Advice” reform package, announced in April by Minister Chris Bowen.

Industry information sessions are being held by Treasury, starting this week across Australia, on the regulatory and legislative reform agenda. However, representatives of consumers and industry super funds are concerned that the banks and financial planning industry are seeking a considerable dilution of the reforms.

The four organisations’ view is that the government’s “Future of Financial Advice” package is a moderate and reasonable set of reforms that were developed in response to a series of major financial scandals including Storm Financial. The findings of the Parliamentary Inquiry chaired by Mr Bernie Ripoll into these scandals were unequivocal in concluding that reform was necessary to improve the quality of financial advice provided to Australian consumers.

In a joint statement, ACOSS, CHOICE, ISN and the Consumer Action Law Centre said today that the reform package was critically important to rebuilding consumer confidence in the financial advice industry.

“The reforms aim to rebuild consumer confidence in financial planning by increasing consumer protection and leading transformation from an industry to a profession.

“If these reforms are to be successful in improving consumer trust and confidence in and access to financial planning, it is critical that all measures that were announced are implemented.

“The package is moderate and pragmatic. It achieves the necessary reforms while providing financial planners generous transition arrangements.

“Since these reforms have been announced there has been significant lobbying and public pressure applied by the financial planning and wealth management industry – including banks, product providers, platform providers and fund managers – to water down aspects of the reform package. The Government should ensure that banks and other large financial institutions are not successful in their efforts to build loopholes into the reforms.

“We can see no reason to treat risk insurance advice differently to other forms of financial advice.”

The coalition of organisations also said that the introduction of a fiduciary obligation for financial advisers to act in the best interests of their clients was long overdue and had been welcomed by most financial planners.

“Our organisations strongly believe that the ‘opt in’ requirement (for a financial adviser to get a client’s annual consent to continue charging any ongoing fee) is central to the fiduciary obligation to act in the client’s best interests and is the only mechanism that enables asset based advice fees to be compatible with a financial adviser’s best interests obligation.

“If an adviser is providing ongoing advice to a client then it should not be an administrative burden to obtain the client’s consent each year to the fee arrangements.

“The banning of other conflicted remuneration forms – including a ban on trail commissions and receipt of any volume based payments or rebates by licensees or planners – are also critical if financial advice is to be provided impartially and free from product bias.

“These reforms will not be effective in eliminating conflicts of interest which have been so damaging to the financial planning industry and to Australian consumers unless all announced measures are implemented.”

Media Contact: Clare Cameron, 0419 626 155