With some financial advisers still viewing the Future of Financial Advice (FoFA) the way an old building might a wrecking ball, it has been interesting this week to see the reforms deployed as a shield.
Perhaps it is a combination of widespread acceptance of the pending reforms and the relatively new threat of the Tax Agents Services Act (TASA) – with a smidgen of better the devil you know than the one you don’t – but the industry, quite rightly, has been quick to play the FoFA card.
On Wednesday the Financial Services Council (FSC) called on the government to amend TASA by June 28 or give the financial services industry a further six-to-12-month extension to comply with it – a time frame supported by both the Financial Planning Association and the Association of Financial Advisers.
John Brogden, chief executive of the FSC, told the parliamentary joint committee hearing that if the TASA bill is not implemented in an amended form, financial advisers could not continue to provide services after July 1.
“We have 18 days to go before we find ourselves in the FoFA regime and are currently in the last month of the third of three one-year exemptions from TASA,” he said. “The industry needs confirmation that there will be no conflict between TASA and FoFA.”
Full house
The FSC’s written submission continues this theme, making the important point that FoFA is a game changer in terms of compliance and a degree of double jeopardy applies.
“TASA is due to commence on July 1, 2013 – the same time as FoFA and months shy of MySuper’s commencement. It is inconceivable that on the cusp of the commencement of significant reforms that the industry needs to again amend business models and practises to comply,” it states.
With Stronger Super and FoFA in place as queen and king, Brogden then produced his ace: the FSC estimates it will cost the advice industry $1 billion to meet the TASA requirements.
And it is not just advisers who will be affected.
“One amendment critical to the future of the advice industry is redefining what tax financial advice services means under TASA,” Brogden said.
“The current definition is too broad and will impact anyone holding an Australian Financial Services Licence. This will include insurers, superannuation providers and even call centres.”
Protecting consumers
Finally, FoFA has neatly undercut the high moral ground taken by the various accounting bodies on the issue of consumer protection.
According to CPA Australia and the Institute of Chartered Accountants Australia, the TASA regulatory framework would require financial planners to comply with more robust academic, competency and ethical requirements.
Paul Drum, CPA Australia head of policy, says the amendments were designed to put in place appropriate protections – that don’t currently exist – for consumers obtaining tax advice from financial planners.
But the point is that they soon will exist.
Consumer protection is already afforded, not under TASA but under the Corporations Act, and from July 1 under the mandatory FoFA measures.
“FoFA will require licensed advice providers to demonstrate the advice they provide is in the client’s best interest, including having the expertise to do so,” states the FSC. “Otherwise advice providers are required by legislation to turn the client away.”
