Challenge and consider changing your licensee
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The professional obligations of financial planners trump those of their employers and should guide their behaviour in dealing with practices or processes that ... [more]
Measures contained in FoFA: Part two
- 28 September, 2011
- 5 comments
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Minister Bill Shorten
The Australian Government has released the second round of measures contained in the draft legislation of the Future of Financial Advice (FoFA) reforms.
Almost a month after the Minister for Financial Services and Superannuation, Bill Shorten, announced the first round of measures contained in the draft, the final details on commissions, volume bonuses, soft dollar benefits and asset-based fees have now been revealed.
The final tranche of legislation will amend the Corporations Act 2001 to “ban the receipt of certain remuneration by licensees which has the potential to conflict the advice they provide to retail clients in respect of certain financial product advice”.
It will define the term “conflicted remuneration” and the ban includes both monetary and non-monetary (or soft dollar) benefits.
However, in relation to monetary benefits the ban does not apply to general insurance, life insurance outside of superannuation, individual life policies not connected to a default super fund and non-advice services.
In relation to soft dollar benefits, the conflicted remuneration ban does not apply to general insurance, benefits under the proposed amount of $300, benefits for the purposes of professional development and non-advice services.
The legislation also confirms the ban on product commissions to financial advisers and their dealer groups.
In addition, volume rebates paid from platform operations to dealer groups and licensees will also be banned.
Asset-based fees, “a fee dependent upon the amount of funds used or to be used to acquire financial products by or on behalf of a client” cannot be charged by licensees or their authorised representatives on geared funds (or borrowed funds) to retail clients.
The second tranche did not contain a definition of intra-fund advice as was previously announced by Minister Shorten.
Check back with Professional Planner Online for more details and updates as they come to hand.
So professional development courses can only be held in Australia and NZ eh. Cannot wait until the next election. What a sick and sorry lot this govt is.
Ok. No more gearing advice (certainly if I’m not going to be paid for it). A politician can receive ‘gifts’ but apparently it is wrong for me to receive the same. The banning of volume rebates is a joke. No more running around for clients with platform issues. They will be directed straight to the provider. I estimate my fees will be increasing by 15% to 20%. Well done labor (not).
By the way – how exactly does FoFA create a level playing field? It has the opposite effect!
I do not see volume payments as an additional cost to investors. It is payment to me for doing half the job that the platform administrators are supposed to do but don’t. Would there be an adviser out there with significant funds on a platform who does not have a great deal of their time taken up chasing loose ends with platforms for the sake of their client. Now I receive nothing for this additional work and I have to ask clients every couple of years if I can get paid. What this union driven government does not understand is that there is no end to the line of people who want payment from me when running a business but now the predictability of my cash flow is completely blown out of the water.
Volume bonuses definitely should be banned because in many cases they are passed directly onto the client who then pays a higher fee. There is usually an identical product with a lower fee which the adviser doesn’t recommend because of a conflict of interest.
But existing arrangements are allowed to continue so this ban will be ineffective anyway.
For the government to say they cannot stop institutions from subsidising their FP network is weak.
The FP networks are run as separate companies. They receive direct payments from the parent company to subisidise their operational losses.
How are those payments any different to a commission/volume bonus or soft dollar?
I cannot beleive that the FPA is supporting the banning of volume rebates when it is obviously going to create an extremely uneven playing field between independentley owned planning firms and the institutionally and union owned plannning firms. Try ringing Q Super and listen to their hold message advertising Q Invest advice which they actually state is subsidised by Q Super. How is that not a conflict of interest? The government has acknowledged that it is unfair but says it is too hard to stop the subsidising by the unions and instutions of their tied advisers. Then why do it at all? The only answer is that the government (and the FPA?) is happy to force independents to charge more for their advice and thereby deprive all but the very wealthy of genuine independent advice.