Disclosure still not addressed in FOFA

The key issue still not being addressed in the Government’s recently announced Future of Financial Advice (FOFA) reforms package is disclosure, with the potential remaining for a client to walk into an institutionally-owned practice believing it to be independent, according to Boutique Financial Planning Principal’s Group (BFPPG) president Claude Santucci (pictured).

As reported in Money Management yesterday, the BFPPG’s FOFA submission outlined concerns that the fiduciary duty requirement would not require planners to look beyond their own Approved Product List (APL).

Santucci said there is no issue with any group or institution using their own APLs, and there is room within the industry for all business models, provided there is full disclosure.

Despite the fact that there are requirements to mention within a statement of advice whether recommendations are restricted to products on an APL, clients often did not read or fully understand the fine print.

It remains possible for a client to walk into a practice and believe that it is independent when that is not the case, he said.

Also, an adviser in an industry fund operating under limited or scaled advice will never recommend a client to consolidate his super out of that fund into a retail product, regardless of where the returns have been better, Santucci said.

“The level of disclosure is almost non-existent in industry funds and major institutions,” he said.

Some planners run their licences independently from bank ownership while others just follow the party line, he added.

When a client walks into a practice he or she should know exactly who owns the licence, what their limitations are, what deals the practice has with which product providers and who is the end beneficiary when any products are sold, he said.

That way it is up to the client whether they seek out an independent adviser or seek the strength of a practice with institutional backing, he said.