FoFA: the unanswered questions

The Association of Financial Advisers (AFA) says the government’s suggestion that licensees and advisers will compete to be FoFA-ready is “unrealistic” given that key components of the reform remain unresolved.

While the Future of Financial Advice (FoFA) legislation has now passed through the Senate, the AFA is concerned that key questions still have not been answered.

“What we had hoped for by this time was for all the wrinkles to have been ironed out,” said AFA president Brad Fox.

“But as it turns out, we are still awaiting clarification on key issues. Delays hinder the adviser’s ability to get on with business and, as an industry, we have waited long enough.”

According to Fox, the industry is still waiting for finalisation of regulations in relation to the grandfathering of payments by platform operators and the release of regulatory guidance on codes of conduct.

He also hinted that there might be further surprises in the regulator’s detail.

“While the Government has indicated that adherence to approved codes of conduct may obviate the need for opt-in, we believe they may also result in the introduction of even more stringent measures,” he said.

“However, we cannot make a proper assessment, because to date, no guidelines have been issued.”

Fox added that the government’s suggestion that licensees and advisers will “race” to comply with FoFA was unrealistic.

While the FoFA webpage has information about the new transition arrangements in its Frequently Asked Questions page, these were last updated before the final amendments were introduced into the Senate.

The key difference is that ASIC is now not required to publish notices lodged by licensees of early compliance with FoFA in the Gazette, but instead must publish details of the notice on ASIC’s website, where the information is more easily accessible for consumers.

It seems unlikely that the regulator will be swamped with requests from early bird applicants.

“It is impossible for the industry to be ‘ready’ to implement FoFA when key elements have yet to be finalised,” said Fox.

“We continue to argue that while the intent of FoFA was honourable, the execution is terrible.

“It is our belief that the agenda was hijacked by vested interests and we will continue to support the removal of elements of the legislation which we believe run counter to the interests of consumers.”

In this respect the AFA’s language is starting to mirror that of the federal Opposition, which has variously described government’s handling of the FoFA legislation as “rushed, inept and chaotic”.

Fox praised the efforts of Liberal Party Senator Mathias Cormann and the Opposition in trying to address the worst elements of FoFA.

“We note and are encouraged by the Coalition’s commitment to repeal opt-in and fee disclosure statements for existing clients,” he said.

On Wednesday the FoFA Bills both passed through the Senate by 34 votes to 28.