Changes to advice laws could lead to catastrophe: ISA

Watering down financial advice laws could expose consumers and regulators to another Storm Financial-type crisis, Industry Super Australia (ISA) says.  

In its submission to an inquiry into the workings of the Australian Securities and Investments Commission (ASIC), ISA cautioned against going too far to repeal consumer protection aspects of the former government’s Future of Financial Advice (FOFA) reforms.  

ISA was particularly concerned about efforts to dilute conflicted remuneration bans and best interests duty, it said, with fears the fallout could be very costly.  

“Thousands of Australians, including regulators and finance industry professionals as well as the victims, are still dealing with the fallout from financial collapses caused by financial advice laws which have failed to protect consumers from conflicted financial advice,” ISA deputy chief executive Robbie Campo said.  

While risk cannot be completely avoided, Campo said the Government has an obligation to go further to shield consumers.   

She said the proposed general advice exemption - which could allow commissions to be paid to advisers for promoting certain products - was especially problematic.  

Echoing support for certain FOFA reforms, the Australian Institute of Superannuation Trustees (AIST) expressed concern that further changes could make financial advice less accessible.  

“The existing FOFA laws are all about providing consumers with the confidence that any financial advice they receive is in their best interests, free from commissions and free from conflicted forms of remuneration,” AIST CEO Tom Garcia said.  

“We think it is very important that the bulk of the population - who do not currently see a financial adviser - are able to access straightforward financial advice through their super fund.”