The government’s FOFA announcement, released this morning, has been heralded as a “positive step” for the financial advice industry.
The SMSF Professionals Association of Australia (SPAA) has welcomed the announcement by minister for finance Mathias Cormann that the Coalition will proceed with the FOFA amendments.
SPAA chief executive Andrea Slattery said the minister’s statement should “reassure the industry and consumers that best interest duty has not been watered down and will still ensure financial advisers act in their clients’ best interests when providing personal advice”.
Ms Slattery referred to a statement made by SPAA’s patron and former chief justice of the High Court Sir Anthony Mason that winding back some aspects of the best interests duty will not mean financial advisers are under no duty to act in the interests of their clients.
“Quite apart from relevant statutory provisions, the common law imposes a duty on an advisor to act in the interests of its client,” said Ms Slattery.
She said SPAA has long supported the removal of the best interest duty catch-all provision because of its “potential to be too broad in its application, create uncertainty and involve a high compliance burden for financial advisors”.
“We were also encouraged by the minister’s commitment to improving the professionalism of financial advice through lifting professional, ethical and educational standards,” said Ms Slattery.
SPAA was also reassured by the government’s announcement there will be no wholesale reintroduction of commissions to financial advice, according to Ms Slattery.
“We are especially pleased to see that the amendments will still prohibit any payment made solely because a financial product of a class in relation to which the general advice was given has been issued or sold to the client,” she said.
SPAA also supports the government’s intentions to establish regulatory powers that will prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration to stop institutions inappropriately using the conflicted remuneration exemption.
“We will be keeping a very close eye on how industry practices develop around the provision of general advice and the conflicted remuneration exemption and will continue to work closely with the government to ensure that the exemption does not lead to undesirable advice practices and consumer outcomes,” said Ms Slattery.
While SPAA considers FOFA as a vital part of improving the quality of financial advice and protecting consumers Ms Slattery said SPAA would like to see high-quality financial advice being driven “by a professional industry of competent advisers”.
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