The new norm on FOFA is here
The Federal Government and the opposition have reached a bipartisan agreement on minor changes and refinements to the Future of Financial Advice (FOFA) laws.
Assistant Treasurer Josh Frydenberg said the refinements will pass through as new regulation before 1 July 2015, indicating that this is the new normal on FOFA.
"The agreed refinements will improve the operation of FOFA, and alleviate a number of unintended consequences, most of which have arisen since the laws were legislated," Frydenberg said.
FOFA should be deemed resolved once the tweaks are put in place and given time to work, he added.
The refinements are:
- Making clear that advice given to an employer about default superannuation funds is deemed as providing a financial service to a retail client;
- Including a wholesale and retail client distinction, thereby bringing FOFA in line with other parts of the Corporations Act 2001;
- Treating non-cash payments, such as travel money cards, the same as other simple financial products;
- Making the changed best interests duty apply to advice on basic banking products and/or general insurance even if it was given at the same time as advice on consumer credit insurance, to which the full best interests duty is applied;
- Making the conflicted remuneration exemption that pertains to basic banking products and general insurance applicable to benefits relating to consumer credit insurance, where an employee of a deposit-taking institution gives advice on any or a combination of these three products; and
- Ensuring benefits provided by a retail client to their financial adviser are exempt from conflicted remuneration provisions.
The Government also said it is consulting on further tweaks to be passed in legislation later this year. This includes:
- Ensuring the ‘mixed benefits' and ‘intra-fund advice' provisions run as planned;
- Ensuring future governments can stipulate in regulations that certain benefits are caught by the ban on conflicted remuneration; and
- Extend the time an adviser has to send an opt-in renewal notice and a fee disclosure statement to their client to 60 days to give advisers time to comply.
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