This is an edited transcript of a speech given by the Shadow Minister for Financial Services and Superannuation, Bernie Ripoll, to the 2014 SPAA SMSF National Conference in Brisbane on February 21.
READ ARTHUR SINODINOS’S COMMENTS
The proposed winding back of FOFA recently announced by the Coalition Government is not good news for investors and not good news for the professional sector. I note that the Assistant Treasurer spoke to you on Wednesday and made a number of claims to the effect that his changes were signalled very clearly and that the changes were minor and technical in nature.
But that is not the case. Take for example the ban on conflicted remuneration and personal advice. On December 20, his press release stated:
“The Government will ensure that the ban on conflicted remuneration only applies to personal financial advice.”
However, when the draft regulations were released an exemption for personal advice was included when part of a balanced scorecard approach. The drafting of that particular change has enough loopholes in it to drive a truck through. In my view whether the Government’s changes were or were not clearly signalled is superfluous as to the detail and impact those changes will have.
As the saying goes the devil is always in the detail and the detail delivered over the Christmas break is only now being properly analysed and understood. If the FoFA changes are implemented as drafted it is effectively the end of a credible best interest protection, professionalising, and the reintroduction of banned fees and commissions.
The whole basis for introducing the FoFA reforms was to restore faith in a sector rocked by high profile collapses, a poor culture of product sales over advice and now with $1.8 trillion of savings, ensure that Australians are getting advice and service that is in their best interests.
During the reform process over many years there was extensive and intensive industry and public consultation that clearly identified a path to achieve growth, protect consumers and restore trust by:
1. Changing the Culture of the past 20 years;
2. Lifting Standards and Professionalise and;
3. Acting in Clients Best Interests
Regrettably the proposed changes from the current Government is sending a clear signal that poor practices of the past including self-interest, a culture of sales over advice, hidden fees and charges, as well as high commissions are squarely back on the table.
The Opposition will examine closely the final proposals, however as they stand we are opposed to the substance of the government’s changes because they undermine consumer protections, reintroduce banned conflicted remuneration, allow conflicts of interest, remove essential disclosure and transparency and turn back the cultural shift.
In any case, if the Government were confident about their claims, then let’s have a proper parliamentary debate open to full scrutiny rather than trying to force change via a Ministerial edict and regulation.
