The Law Council of Australia has warned that the Government's Future of Financial Advice (FOFA) changes risk going further than is necessary to achieve their core outcomes.
In a submission filed with the Parliamentary Joint Committee reviewing the FOFA bills, a specialist superannuation committee within the Law Council said it was concerned that the likely impact of the legislation "will be much broader than is necessary to ensure that retail clients have access to unbiased financial product advice".
At the same time, the submission argues that the legislation introduces a significant degree of uncertainty for financial advisers and product issuers and that if it is passed in its present form it will "have unintended and potentially negative consequences on superannuation funds and their members".
Among the core concerns cited by the Law Council committee were the breadth of Australian Securities and Investments Commission's discretion to refuse to grant an Australian financial service licence, to cancel a licence and to make a banning order; the apparent "mislabeling" of the proposed best interests obligation and the associated provisions; the prospect that product fees will be included in ongoing fee arrangements; the breadth of the definitions of conflicted remuneration, platform operator and volume-based shelf-space fee; and the failure of the bill to address the issue of financial adviser fees being deducted from members' interests in superannuation funds.
The Law Council submission also points to deficits in the drafting of the FOFA bills with respect to existing forms of remuneration for financial advisers, and the manner in which the legislation imposes expectations on licensees and their representatives.
"It should not be left to a licensee or a representative of a licensee to argue that a section of the Act or a Regulation is unconstitutional," the submission said. "It is incumbent on the Government to take advice and determine the extent to which it must protect existing remuneration rights.
"It is not appropriate to leave it to individual action by licensees or their representatives," it said.
