The Financial Planning Association (FPA) has warned the Federal Government its Future of Financial Advice (FOFA) bills, as currently drafted, are unlikely to reach their policy objectives of improving the quality of financial advice and strengthening investor protection.
In a submission to the Parliamentary Joint Committee reviewing the FOFA legislation, the FPA has referenced the policy objectives first outlined by the former Minister for Financial Services, Chris Bowen, and has pointed to the reasons why those objectives are unlikely to be met.
Further, the FPA said the formulation of a best interest duty was "never going to be and neither should it be the avenue in which financial advice was going to be made more accessible and affordable".
"The Government had promised that this would be an outcome of FOFA but at this stage we agree with many in the profession that it is clear that Government is unlikely to meet this policy objective with the Bill as drafted," the submission said. "The FPA therefore submits that the FOFA reforms fail to deliver on the second guiding principle of increasing access to financial advice to more Australians."
The submission pointed to the official Regulatory Impact Statement (RIS) statement attaching to the legislation which stated that "it is expected that adviser remuneration, as well as the number of advisers, will reduce over the long term".
It said the RIS had quoted figures produced by Rice Warner that financial adviser numbers will reduce from 15,400 to 8,600 in 2024, "which the FPA submits is actually counter-productive to the proposed guiding principle and therefore FOFA, as a result, has or will partly fail in its proposed objective".
While the FPA submission said the organisation welcomed the overall FOFA reforms, it made clear it remained strongly opposed to opt-in.
It said it was apparent that the key objectives of 'improved transparency' and 'investor protection' could be achieved using just a few of the measures (proposed in the FOFA Bills (tranche 1 and 2). That is through the 'best interest' provisions and the 'removal of conflicted remuneration'.
"The FPA do not believe the client renewal 'opt-in' measure is necessary in the new world (that will be governed by the 'best interest' measure with no commissions) and merely poses risks to the client and duplicates administration (in the case of the disclosure requirements), leading to an increase in the cost of financial advice for all Australians," the submission said.
