Taxpayers Australia says tread warily on FOFA reforms

The government should tread warily in making changes to the Future of Financial Advice reforms (FOFA) that many do not see as being in the interests of investors, said Taxpayers Australia.

“Investors do not have short memories.  They remember Storm Financial and the other investment collapses well, particularly the culture of putting ‘what is in my commission’s best interest’ over what is in the client’s best interest mentality that pervaded the worse elements of the financial planning industry,” said Reece Agland, Superannuation Products and Services Manager at Taxpayers Australia.

“While there was some overreach in elements of FOFA, it generally got both the politics and the policy right,” Agland said, but added that “we accept that the two year opt-in requirement and complex fee disclosure requirements add to the complexity of administering the system without providing additional protection to consumers, and needed to be reviewed.”

However on the issue of the “best interest duty” and commissions for general advice Agland said that Taxpayers Australia does not see eye-to-eye with the government’s proposals.

“There needs to be an overriding requirement that any advice is in the best interest of the client.  Without it, financial advice merely becomes a tick and flick approach of meeting a checklist rather than considering the client’s circumstances,” Agland said.  “At the forefront of any adviser’s mind must always be what is in the best interest of the client.”

“The financial planning industry, through its professional body the Financial Planning Association, recognises the need to move from commissions to fees and we support their call to maintain the ban on commissions in relation to general advice.  We are not convinced bank tellers are prevented from doing their job or that general advice is any lesser advice than personal advice.

“FOFA has gone a long way to improving financial advice and restoring trust in financial advisers,” Agland said. “It would be a shame to see this undone.”