Consumer advocacy group CHOICE has welcomed the Federal Government’s announcement that financial protections in the Future of Financial Advice (FoFA) laws will remain but warns that more work is needed to make sure consumers can trust advice on life insurance products.
The news comes following a spate of high profile financial advice scandals from major institutions such as Commonwealth Bank, NAB, ANZ and Macquarie Bank, leaving thousands of consumers out of pocket and waiting for redress.
“The consumer protections in FoFA are vital. They require advisers to act in a consumer’s best interests, make sure most advisers can’t receive conflicted remuneration and ensure consumers receive regular information about the advice they pay for,” says CHOICE Acting CEO Matt Levey.
“The FoFA reforms deal with the reasons behind the worst financial advice scandals, from the Commonwealth Bank fiasco to Storm Financial Planning.”
“The Federal Government has listened to consumer groups like CHOICE. They are keeping the essential protections consumers need to restore trust in the financial advice industry,” Mr Levey says.
However, CHOICE has warned that the Federal Government’s announcement on life insurance advice does not go far enough.
“The original FoFA laws contained a major loophole, exempting advisers providing recommendations on life insurance products from meeting key consumer protections. The Federal Government’s announcement will reduce the conflicts in life insurance advice but not eliminate them,” Mr Levey says.
“Under proposed changes, advisers will still be paid upfront and trailing commissions when recommending life insurance. Although the commissions will be lower, under this system life insurance advisers remain salespeople, not trusted professionals able to provide conflict-free recommendations about complex products.
“Elements of the reforms put this straggling section of the advice industry on the path to professionalisation. The Federal Government has negotiated a solution that will increase the information available to ASIC to monitor the industry and widen Approved Product Lists.
“These life insurance advice reforms can only be seen as the start of what needs to happen in terms of lifting standards. CHOICE expects the review in 2018 to consider additional steps to finally remove conflicted remuneration in the financial advice industry that decades of scandals have demonstrated leads to consumers losing out,” Mr Levey says.
Source: CHOICE
