The financial services industry expects to have until at least 1 July 2013 to comply with the Future of Financial Advice (FoFA) reforms after intense lobbying by industry groups to push back the deadline.
The proposed commencement date for the bulk of the changes is 1 July this year, a start date supported by consumer groups.
However, sources have told PPO that an extension by a year to 18 months is likely to be one of the few concessions granted to the industry with one insider convinced that only “minor changes” will be made to the current draft legislation.
A spokesperson for the Minister for Financial Services and Superannuation, Bill Shorten, said the Government was still consulting the industry but didn’t rule out an extension.
“We are taking a look at whether additional transitional relief is required beyond what the Australian Securities & Investments Commission (ASIC) announced late last year,” said the spokesperson.
In December, ASIC suggested the time frame was anything but clear-cut, stating it would depend on the timing of the legislation’s passage through the Australian Parliament.
“ASIC will also adopt a facilitative compliance approach for the first 12 months of the implementation of the FoFA reforms, until 1 July 2013,” the regulator said at the time.
“That is, provided industry participants are making reasonable efforts to comply with the FoFA reforms, ASIC will adopt a measured approach where inadvertent breaches result from a misunderstanding of requirements or systems issues.”
However, the Financial Services Council (FSC), the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA), have all used the submissions process and this week’s parliamentary joint committee to push for more time to comply.
All three groups believe there should be at least a two-year transition and implementation period similar to what applied when the Financial Services Reform Act was introduced in 2001.
Those reforms commenced on 10 March 2002 and included a two-year transition period, ending on 10 March 2004.
Given the breadth of the FoFA reforms and their impact across the whole financial services industry, the FSC strongly advocates that similar arrangements are necessary.
“All major financial services reforms have been accompanied by an appropriate transition period – reflecting the need for the industry to undertake major information technology/systems, business process, compliance procedure, (competency) training, disclosure documentation changes and in some cases, amendments to licensing requirements,” it stated in its December submission.
“These reforms are no different and in our view represent at least as significant a change to the operation of the financial services industry as those introduced by the Financial Services Reform Act 2001.”
However, consumer groups disagree, arguing that there is no justification for any more delays or concessions, which, some believe, would further dilute the regulation of financial advisers.
In a joint submission, consumers groups including CHOICE, the Consumer Action Law Centre, the Australian investors and shareholders associations, retirement investment information centre NICRI and COTA argue the case for reform is overwhelming.
“The industry has been on notice for years things were going to change, the government has bent over backwards to consult them and enormous concessions have already been made,” said CHOICE director of campaigns Christopher Zinn.
“Yet still key elements of the industry want to be cut more slack and be given more time. Any delay will see consumers continue to have their savings unjustly eroded by commissions and other unfair, unclear and excessive charges.”
When are we going to have a “secret shopper” on Choice and ASIC? Advisers need to stand their ground and just say enough is enough.
While the industry may have known that change is coming, that doesnt mean that the exact nature of the change and the specific legislation to enact it is clear.
There is a very significant cost to changing systems to be able to implement the changes FOFA is proposing. Why would you start changing your systems only to find that youve anticipated something different to what was actually required and then have to rejig your IT systems/software/etc all over again.
Just another comment from someone (Zinn) with their own vested interest, who has never run a business, just to make himself seem relevant.
This is all great. However, choice and Mr Zinn lost all credibility long ago with their antics of the big switch, which I also understand is a dismal failure.
Why do you continue to publish the remarks of someone who has lost credibility?