The Federal Government has announced changes to the Future of Financial Advice (FOFA) legislation that will remove the ‘opt-in' requirement for planners, amend existing grandfathering provisions and also amend the best interests duty to allow for the provision of scaled advice.
The changes were announced late last year with the Assistant Treasurer Arthur Sinodinos stating that while the Federal Government supported the principles of FOFA it believed the previous Government's reforms were too drastic and imposed burdens on the financial services industry while increasing the cost of advice to consumers.
Sinodinos also stated the reforms would save the financial services industry an estimated $90 million in implementation costs and reduce annual compliance burdens by an average of approximately $190 million per year.
The grandfathering changes would cover the sale of financial planning businesses, superannuation to pension switches under multi-product offerings, and the situation of employed advisers becoming self-employed advisers.
Other changes announced include that Fee Disclosure Statements would only apply to new clients from 1 July 2013 as well as the removal of the ‘catch-all' arrangements from the best interests duty.
Further amendments to the best interests duty would allow planners to provide scaled advice, with planners to agree on the scope of advice to be provided to clients while ensuring it was also appropriate for the client.
The ban on conflicted remuneration will apply only to personal financial advice as well as to commissions on risk (life) insurance products inside superannuation if no personal financial advice about these products has been provided.
The changes have been welcomed by the Financial Planning Association (FPA), Association of Financial Advisers (AFA) and the Financial Services Council (FSC).
However FPA chief executive Mark Rantall called for further streamlining to take place in the Fee Disclosure Statement process as well as the enshrinement of the term ‘financial planner'.
The Australian Securities and Investments Commission (ASIC) also commented on the release of the proposed amendments, stating it would take a "facilitative approach to the FOFA reforms until mid-2014" which was consistent with ASIC practice during the introduction of major policy reforms.
ASIC would still take enforcement action if it identified deliberate breaches of the new requirements but would not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal.
