Chan & Naylor: Government & power brokers must consult wider financial industry before further FoFA changes

Whilst the Government’s proposed Future of Financial Advice (FoFA) regulations will be retained following the recent failure of a disallowance motion in the Senate, leading national accounting and wealth advisory group Chan & Naylor is calling on all parties with influence to consult with the wider industry ahead of further near term changes in order to fix the broken regulation before long term harm is done to both the financial advisory industry and consumers.

“Currently we are shooting ourselves in the foot by completely disregarding the original intent of this reform,” said David Hasib, a Partner at Chan & Naylor Wealth Planning, adding that the financial sector has already dropped its duty of care to Australian consumers.

“The Palmer United Party’s proposed amendments barely scratch the surface and don’t deal with the underlying issue of how this industry has been behaving over the last 20 to 30 years,” said Mr. Hasib. “This is driven by remuneration and right now there are simply are too many noses, with vested interests, in Australia’s financial services industry trough.”

Mr. Hasib argues that the issue of conflicted remuneration has not been satisfactorily addressed and this will put advisors back in the firing line. As such he believes that the entire industry, including dealer groups and product manufacturers, must be held more accountable, particularly as between 80% to 85% of financial planners have some form of institutional ownership (via their licensee).

However, if FoFA passes to law in its current iteration then Mr. Hasib believes that this will lead to a number of perturbing outcomes including increased red tape, further consumer confusion and, as the cost of doing business gets inevitably more expensive; the provision of quality advice will become further removed from ordinary Australians who need it most.

“Before any further changes are made to FoFA, the Palmer United Party and the Federal Government would benefit from consulting with the broader financial services industry to gain a deeper understanding of the long standing issues,” said Mr. Hasib. “If we can remove the inherent, product selling culture of the 80’s & 90’s, then it will be to the benefit of all Australians.”

In its original submission to the Financial Services Inquiry (FSI), Chan & Naylor recommended that ASIC should be at the forefront in upholding a widely recognised standard and code of conduct that provides clear and consistent compliance guidelines for all areas of investment and related advice. Having a single set of industry rules with one common outcome will enable the industry to act in the best interests of its clients and achieve the best outcome on their behalf.