Fast Lane: Why we need to make a fuss about FoFA

The fight is on over the Abbott government’s push to unwind Labor’s Future of Financial Advice reforms.

The FoFA reforms initially set out to ban commissions for financial advice, require financial advisers to ask clients whether they wish to continue receiving their service every two years and require financial advisers to act in the best interests of their clients.

But led by former assistant treasurer Arthur Sinodinos, the Abbott government moved to water down the “burdensome” reforms and announced many of the changes will be made by regulation not legislation, meaning there will be no scrutiny by a parliamentary committee.

The key amendments under FoFA now include removing the opt-in requirement, streamlining the annual fee disclosure requirements, amending the best interests duty to allow for scaled advice, exempting general advice from conflicted remuneration and amending grandfathering to allow for adviser movements.

It’s now open slather with the sudden resignation of Sinodinos and the fight is on as to whether companies should be free to motivate employees offering consumers general product information with commissions and bonuses to maximise sales. 

Finance Minister, Mathias Cormann, is now back in the driver’s seat and he has made it clear he believes an effective ban on incentivising employees to provide basic general advice is “just ridiculous”.

The political wrangling means that FoFA’s guiding principle of bringing clarity to financial service clients appears to have been lost.

The financial services industry has been preparing for the FoFA reforms for a long time and the constant changes are just adding to the uncertainty.

For the more forward thinking members of the industry it should be abundantly clear that commissions and financial advice ‘fees’ of which clients are unaware of need to come to an end.

Requiring financial advisers to act in the best interests of their clients should be standard, not controversial.