The federal government’s vision for the future of financial advice in Australia has become rushed and uncertain, leaving some advisers concerned that the reforms will “decimate a particularly important industry”.
In its most recent submission to the parliamentary joint committee (PJC) tasked with making recommendations on Future of Financial Advice (FoFA) reform, the Association of Financial Advisers (AFA) again called for more time to digest changes it says have caused “significant disquiet within the industry”.
In introducing the AFA’s position, CEO Richard Klipin outlined the industry’s frustration at what it perceives has been a lengthy delay against a back-drop of economic turmoil.
“Unfortunately, we are now a full two years on from the release of the PJC report (Ripoll Inquiry), and the eventual outcome of FoFA still remains unclear,” he said.
“When put in the context of the huge impact that the GFC has had on advisers (and their clients), this now reflects a period of nearly four years where advisers have been subjected to huge environmental and regulatory uncertainty.”
The AFA is particularly alarmed by predictions of a significant reduction in adviser numbers, contained in the Explanatory Memorandums (EM) to both Tranche 1 and 2 of the draft FoFA legislation, which it says highlights the level of anxiety and uncertainty being experienced.
“If the reduction of over 40 per cent of advisers, as suggested in the EM, were to eventuate, this would decimate this particularly important industry,” says the AFA submission.
“Such an outcome would result in a significant reduction in the number of consumers receiving advice, which would have seriously detrimental impacts upon the country as a whole.”
According to Klipin, a clear indication of the extent to which FoFA has lost direction is apparent from the Tranche 1 Bill that was introduced into Parliament on 13 October 2011.
“This bill was limited to Opt-In, which was never part of the PJC recommendations, and an increase in ASIC powers,” he said.
“Thus of the 11 PJC recommendations and the seven key FoFA recommendations from April 2010, only a small fraction appeared in the first FoFA Bill.”
The AFA is of the view that the debate on FoFA has become inexorably mired in a range of technical issues and it needs to be re-focused on the key issues facing consumers.
The AFA has further concerns about the consultation process, which it believes started well but is currently being “rushed through [as if] following a predetermined outcome”.
“There has been no explanation provided as to why FoFA has been split into separate Tranches,” said Klipin.
“There is a level of concern within the industry with respect to the reasons for why FoFA has been broken into multiple Tranches and the lack of explanation for this.
“Breaking FoFA up into multiple tranches is poor practice. The industry should be given the chance to review the legislation in its entirety, not in bits and pieces.”
The AFA has also concluded that a start date of July 1, 2012, is unworkable for implementing FoFA reforms.
“In the context of the referral to the PJC and the Senate Economics Committee, it is now clear that the legislation cannot go back into the parliament for a number of months,” states the AFA submission.
“This means that it is now impossible for the industry to be ready for a 1 July 2012 commencement. The AFA has previously voiced a view that the commencement date should be no less than 12 months after the date the legislation is passed.
“Based upon this principle, 1 July 2013 would be the soonest that the legislation could commence.”
Leave a Comment
You must be logged in to post a comment.