Consumer groups including Choice and the Australian Shareholders Association (ASA) have welcomed the Government's Future of Financial Advice (FOFA) bills but argue they need to be made even tougher.
In a joint submission filed with the Parliamentary Joint Committee reviewing the legislation, the consumer groups said they believed changes were needed with respect to best interests and financial advice around basic banking and insurance products, conflicted remuneration, shelf-space fees and asset-based fees.
In particular, the submission has called for the removal of the carve-out for general banking and insurance advice which it argues lowers the standard of financial advice.
The submission argues the legislation needs to be clarified to ensure it meets its overall objectives.
It cited the particular changes required as being:
- The provisions limiting the scope of the best interests obligation when financial advice relates solely to basic banking products or general insurance must be amended. Without amendment the bill will actually set a lower standard of advice than the current law.
- The carve-outs from the definition of 'conflicted remuneration' need to be amended to ensure that consumers actually receive financial advice that is untainted by conflicted remuneration.
- The ban on shelf-space fees to platform operators should be widened to prevent all payments by product issuers that may distort the financial advice given to retail clients.
- The ban on asset-based fees should be widened to limit the deleterious effects of such fees for consumers.
- A number of drafting errors should be addressed to ensure that the Bill does not have unintended consequences.
