The Association of Financial Advisers (AFA) has reacted strongly to the disclosure provisions of the Financial Services Reform Bill, claiming they are inconsistent and not beneficial for consumers.
The bill states that disclosure will be made on all products sold to retails clients, which will cover risk and life insurance, securities and managed funds but also include general insurance, superannuation and any other financial product.
AFA national president Joe Nowak says the AFA supports commission disclosure on investment products since the level of commission affects the end benefit of the investment.
However Nowak also says the bill is inconsistent in the treatment of disclosure on non-accumulation products in the three documents required when a financial services occurs.
Throughout the process of a financial service advisers are required to furnish clients with a number of documents and the AFA has indicated that it is happy to comply with the disclosure requirements in the first two.
These documents, the Financial Services Guide and Product Disclosure Statement, state that commission will be disclosed so clients may understand how they pay for the service and where commission has no effect, disclosure is not required.
However the AFA has rejected the component in the third document, the Statement of Advice, which says disclosure should be in dollar amounts where possible and include soft dollar renumerations, sales quotas and volume bonuses.
Nowak says the association feels that on non-accumulation products such as risk and life insurance, the price and not the mark up, in the form of commission, is the main factor in determining the client’s decision.
