FOFA contains too many remuneration exemptions

The Future of Financial Advice (FOFA) ban on conflicted remuneration has so many exemptions that it is questionable whether it has had any impact on the overall sales culture within Australian banks, according to the Consumer Action Law Centre (CALC).

In a submission to the Senate Economics Committee inquiry into consumer protection in the banking, insurance and financial sector, the CALC claimed it remained clear that there was a sales culture rather than a service culture in Australia’s banking industry.

“We see commissions and targets for product sales, but no incentives for after-sales service or complaints handling,” it said. “We need the culture of Australian retail banking to shift away from a hard-sell approach and towards a service focus. Incentivised sales targets (or ‘conflicted remuneration’) are a clear impediment to that goal.”

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The submission claimed bank staff themselves had provided examples of a ‘target-based, sales-driven culture where their perception was that the imperative was not customer service per se but to sell.

“The risk of harm created by conflicted remuneration was acknowledged during the Future of Financial Advice reforms process,” it said. “Unfortunately, the FOFA ban on conflicted remuneration has so many exemptions that we question whether it has had any significant impact on the overall sales cultures of Australian banks.”

“Despite the FOFA reforms, conflicted remuneration arrangements are still permitted for the following products (among other exemptions):

  • Credit products (e.g. mortgages and credit cards);
  • Basic deposit products (e.g. bank deposit);
  • Non-cash payment products;
  • General insurance products; and
  • Consumer credit insurance (CCI).”



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