The Future of Financial Advice (FoFA) reforms present the financial planning industry with some significant changes. The reforms have got financial plannners’ backs up, and influential figures in the industry believe Minister Shorten has failed to realise that many of the financial losses suffered by consumers in the past were the result of product rather than advice failures.
It is true that most collapses such as Westpoint and Trio/Astarra could generally be put down to failures of product. This has led to criticism of FoFA being too narrow in its focus, and that reform should also encompass those who develop financial planning products as well as those who sell them. This lends strength to the arguments of prominent financial planning figures that FoFA needs to be broader in its focus.
Most financial planning firms are ethical and take a similar approach to providing advice around sound products. The problem is that some financial planning firms are often lured to less-than-sound products by highly lucrative commissions-based remuneration structures. This is why Minister Shorten wants to crack down on conflicted remuneration structures, so the overall intention here is genuinely for the good.
It’s a shame that the financial planning industry has been painted with a brush tainted by a few bad planners. It’s a fine line between over- and under-regulation with FoFA. Financial planning industry groups such as the Association of Financial Advisers are lobbying hard to strike the right balance, and Minister Shorten would do well to take a bipartisanship approach with the FoFA legislation.
