The Australian Bankers’ Association (ABA) has weighed in on the government’s proposed financial services reform, warning that the proposed legislative package could stifle product and service innovation in both retail and business banking.
While the ABA supports the Future of Financial Advice (FoFA) reforms in principle, it has concerns about the breadth of the provisions and the prescriptive nature of the changes.
“The FoFA legislative package will have significant implications and may result in adverse and unintended consequences across the banking and financial services industry, including undermining the policy intent of the FoFA reforms to broaden access to affordable financial advice,” said CEO Steven Münchenberg in introductory remarks to the ABA submission.
The ABA believes that the policy intent of the FoFA reforms is directed at the business of financial planning and the provision of personal advice by financial planners to retail consumers, not banks and the business of banking and finance.
“Consumers understand that each bank will only provide information or advice on, or sell, the bank or banking group’s own products,” it states.
“Consumers do not expect to receive independent advice on basic banking products available across the entire retail banking market.
“Importantly, banks have adopted distribution strategies for basic banking products and other financial products seeking to exploit different distribution channels and business models to ensure that customers can access products and services with ease and in ways convenient to them.”
Despite this, the ABA is concerned that the proposed provisions in the FoFA legislative package could be counterproductive to improving the quality of financial advice and the professionalism of the financial planning industry.
“We are concerned that the FoFA legislative package could inappropriately stifle product and service innovation in retail banking and business banking and unnecessarily hinder the availability of financial advice to many Australians,” said Münchenberg.
Specifically, the ABA believes, FoFA reforms could stifle product and service innovation in retail banking due to the increased costs of banking and decrease the availability of simple, low-cost advice on basic banking and financial products.
“Eventually, these costs will be passed on to bank customers. Therefore, we consider that the law should be targeted to the business of financial planning.”
