The fate of the Government’s Future of Financial Advice (FOFA) legislation will be decided by debate in the House of Representatives after the Parliamentary Joint Committee (PJC) reviewing the FOFA bills failed to produce a bipartisan report.
The divide between the Government and Opposition members of the PJC was wide, with the Labor members of the committee adhering closely to delivering only minor changes to the FOFA bills originally tabled by the Minister for Financial Services, Bill Shorten.
By comparison, the Coalition made clear it wants opt-in removed and annual fee disclosure made prospective, with the best interests duty amended to specifically allow agreement between clients and their financial advisers.
The Opposition also wants the ban on risk commissions inside superannuation limited to automatic insurance cover within superannuation funds where individuals have not accessed specific financial advice, namely in default super arrangements.
However, the dissenting report said the Coalition wanted no changes to existing remuneration structures with respect to risk insurance where the consumer accessed specific financial advice – and that should be irrespective of whether that insurance is structured inside or outside superannuation or whether it is an individual or a group policy.
The Coalition members of the PJC have produced a dissenting report claiming the two FOFA bills are unnecessarily complex and in some parts unclear.
It says they will likely cause job losses in the financial services industry, will enshrine an unlevel playing field amongst financial advice providers and will cost about $700 million to implement.
The Coalition senators and members want the FOFA legislation deferred until it passes a Regulatory Impact Statement. As well, they want the legislation timed to coincide with the Government’s MySuper changes.
Commenting on the PJC outcome, Opposition financial services spokesman Senator Mathias Cormann said the Coalition supported sensible reforms which increased trust and confidence in Australia’s financial services industry by increasing transparency, choice and competition.
He said the government had failed to achieve the right balance with FOFA because it had failed to comply with its own internal process requirements around best practice.
The differing reports flowing from the PJC process mean the shape of the FOFA bills which advance to the Senate will be decided in debate on the floor of the House of Representatives.
This means the stance of independents Rob Oakeshott and Andrew Wilkie on the key question of opt-in will be crucial.
