The mooted penalties that could apply to breaches of components of the Government’s Future of Financial Advice (FOFA) reforms have drawn criticism from across the industry.
There have been suggestions that the maximum penalties that apply to serious breaches, such as an adviser’s fiduciary responsibilities, could also apply to administrative breaches such as those pertaining to new opt-in requirements.
Financial Planning Association chief executive Mark Rantall (pictured) said that the penalties should match the crime, and some of the maximum penalties already in place would not be appropriate for opt-in breaches.
“Opt-in should not be law and this is why,” he said.
Much of the recent debate has been pushed by the Industry Super Network and consumer group CHOICE, but Professional Investment Services group managing director Graham Evans said he wasn’t too concerned with the threats and heavy handedness coming from that side of the debate.
“A lot of this noise can go on – let’s deal with the facts and consider what the real issues are,” he said.
He questioned the benefit of opt-in to consumers and said it was important to arrive at solutions that are not going to cost the consumer more and put advice out of reach for the everyday person.
With the FOFA reforms still to get through parliament, Evans said he had great faith in the independents to understand the issues and make a decision reflective of what their constituents were telling them – suggesting that the strict penalties being associated with opt-in were unlikely to become law.
Matrix Planning Solutions managing director Rick Di Cristoforo also believed the penalties were unlikely to come into play.
“I think that common sense will prevail. Treasury is aware of the practical implications of something that doesn’t make sense,” he said.
“This is so far from common sense [and] it will be exposed that way. If it goes down that path it further threatens the credibility of FOFA. How is it in the client’s best interests?”
Di Cristoforo said the appropriate course to rectify a situation where a client had been charged a fee without opting in would be to refund the fee.
Association of Financial Advisers chief executive Richard Klipin said it was important that sanity prevailed. He was also concerned that FOFA had lost sight of its original intent.
“We think the current debate is playing to sectional interests, in particular to industry funds. Minister Shorten has a chance to demonstrate strong leadership and get the debate back on track,” he said.
Fiducian managing director Indy Singh expressed concern that the FOFA debate was becoming an increasingly industry super fund driven agenda. CHOICE and the ISN were acting as if they were the Government, and were trying to take on the financial community, he said.
If opt-in becomes law the industry will have to live with it, but it will do nothing to generate confidence in the small investor, Singh said.
“Are we afraid? No. Let them bring it on. We’re compliant, we’re doing everything right, and we have nothing to fear. We only hope [the Government] will get the point without creating too much damage and fear among industry participants,” he said.
