SPAA supports best interest ‘catch all’ removal, but general advice and conflicted remuneration remain a concern

The SMSF Professionals’ Association of Australia (SPAA) strongly supports the catch-all provisions of the best interest duty recommendations by the Senate Economics Legislation Committee. But SPAA remains concerned by its decision to give the green light to the Government’s amendments to the FoFA legislation on conflicted remuneration and general advice.

SPAA CEO Andrea Slattery says although SPAA supports the other amendments recommended by the Committee to FoFA, on the conflicted remuneration issue “we believe the Government could seriously weaken the policy intent of FoFA to protect consumers”.

“As the pre-eminent organisation in the self-managed superannuation industry, SPAA has always been a strong advocate of professionalism and sees FoFA as a critical tool to improve the quality of financial advice to help ensure consumer protection into the future.

“We have been especially strong supporters of the FoFA reform’s introduction of the best interest duty for financial advisors and the elimination of conflicted remuneration. We have also strongly advocated the removal of the general advice provisions in favour of a simple distinction between sales information and personal advice.

“We believe that the introduction of a best interest duty and the banning of conflicted remuneration were key elements of the reforms and are essential to maintaining the consumer protection focus of FoFA.

“Although the recommendations of the committee to clarify the operation of the legislation will change the wording in the explanatory material accompanying the legislation, the reality is this will have little effect in practice.

“What needs to be done is to make the legislation perfectly clear on this issue instead of trying to clarify its operation through the explanatory statements accompanying the legislation.

“If financial planning is to become a true profession and provide sound financial advice to clients, the industry needs to adopt professional characteristics that requires a delinking of the product from the imbedded remuneration arrangements, including commissions,” she says.

Slattery says SPAA remains committed to the Government’s amendments to remove the “catch all” provision from the best interest duty and the opt-in arrangements.

“It’s our belief that these amendments will reduce compliance costs for financial advisors and enhance the ability to deliver scaled advice to consumers who are seeking a limited subset of personal financial advice.”