Treasury is asking financial planners for insight on whether key Future of Financial Advice (FoFA) reforms achieved their intended aims and how much they cost businesses to implement, while making clear its view is the reforms “should continue in their current form”.
In a post-implementation review, Treasury has concluded five FoFA regulations have improved transparency and outcomes without a significant cost to consumers, but it now wants concrete examples from industry on how the legislation has affected revenue.
On the banning of upfront commissions, conflicted remuneration and “soft dollar benefits” above $300, Treasury’s view is the benefits outweigh the risks, but notes in a consultation paper: “The policy would have imposed costs on financial advisers who would have lost access to a source of remuneration, resulting in lower profits for some advisers or even some advisers exiting the market.”
A review by the government’s policy assessment body, the Office of Best Practice Regulation, is compulsory after the introduction of any new regulation or significant change.
The scope of the review covers the following five areas, for which Regulation Impact Statements haven’t been prepared: the ban on upfront and trailing commissions for both individual and group risk insurance in superannuation; the opt-in requirement; the ban on “soft dollar benefits” over $300 per benefit; the limited carve-out for basic products from the ban on certain conflicted remuneration structures and the best interests duty; and the clarification around access to scaled advice.
The change to scaled advice is the only reform among the five that Treasury believes would not have been associated with a cost to financial advisers, the review states.
Given a number of reforms were introduced at about the same time, Treasury notes, it’s difficult to isolate the impact each of the five changes has had.
In response to a consultation paper, Treasury has posed the following questions:
- Has the regulation achieved its intended objective?
- Were there impacts on business other than those identified?
- Were there impacts on consumers other than those identified?
- What were the compliance costs of the announced measures?
- Do you have any concerns or comments regarding the impact and operation of the regulation?
- What are your views regarding the regulatory option chosen by the government compared to the alternative options which the government could have pursued? What are the key costs and benefits of these alternative options compared to the chosen option?
Planners and other stakeholders have until June 9 to make a submission to the following address: FOFA.PIR@Treasury.gov.au. The full consultation paper can be found here.
