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Industry funds face FOFA rope-in
Industry funds might find themselves tipped into the same opt-in and fee disclosure regime as financial planners if the Federal Government fails to have its Future of Financial Advice (FOFA) changes signed off by the Senate.
The Senate looks likely to disallow the Government’s FOFA regulator changes, and the Minister for Finance and Acting Assistant Treasurer, Senator Mathias Cormann has said that there is no Plan B if that occurs.
However he has held out the likelihood of ensuring that industry funds will find themselves fully exposed to what many financial planners regard as the most costly and time-consuming elements of the FOFA legislation - opt-in and retrospective fee disclosure.
What is more, he claims the industry funds were specifically excluded from exposure to opt-in and fee disclosure via a special deal formulated by former Financial Services Minister and now Federal Opposition leader, Bill Shorten.
Acknowledging that the Palmer United Party leader, Clive Palmer has been subjected to a barrage of negative analysis on the FOFA changes, Cormann has denied there is anything in the Government’s package which undermines consumer protections.
“With our improvements to financial advice laws which came into effect on 1 July, we have started to deliver on firm policy commitments we made in the lead up to the last election,” he said. “In doing so, we kept all the important consumer protections in place, in particular the statutory requirement for advisers to act in the best interest of their clients and the ban on conflicted remuneration for financial advisers.”
“In our regulations we went even further by banning all commissions for general advice provided by bank employees and others in the context of relevant financial product sales.”
“I look forward to the opportunity to discuss these issues with Mr Palmer, PUP Senators and all other crossbench senators with an interest in this issue over the next week,” Cormann said.
“There is no plan B. We have presented the improvements to our financial advice laws we took to the last election with the objective to have a robust but also an efficient and competitively neutral regulatory system in place, where people saving for their retirement, managing their retirement or managing any other financial risks through life can access high quality advice they can trust and which is also affordable,” the minister said.
“What I will do though, if the Senate is indeed of the view for example that Opt-In and retrospective fee disclosure requirements should stay in place for small business financial advisers, is consider whether in the interest of competitive neutrality, those requirements should apply equally across the financial services sector, including to all advice provided through industry funds, which Bill Shorten exempted from those requirements in a special deal for them when he was the Minister,” Cormann said.
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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