The government’s first tranche of draft legislation of the Future of Financial Advice (FoFA) reforms, fails Australian consumers and is clearly biased towards some segments of the industry at the expense of others.
The draft legislation must be measured against the twin objectives of access for consumers to quality advice and the removal of conflicts of interest. On both counts, the FoFA draft legislation has failed.
FoFA uses a heavy-handed approach to force change without a shred of independent research, without any Treasury modeling or rigour and with no clear evidence as to the impact and consequences for consumers, advisers and the industry.
The government’s use of Rice Warner Research, commissioned by the Industry Super Network (ISN), which indicated that the cost of implementing opt-in was in the vicinity of $11 per client, is a blatant demonstration of the government’s bias.
The inclusion of the ISN research and the exclusion of all other valid research on the topic of opt-in is flabbergasting and quite simply wrong. The minister in this regard is not acting in the public interest, but in the interest of industry super funds. Research from the advice market has opt-in costing $100-250 per client with cost imposts at ever level of the advice chain – adviser, licensee and product provider.
Opt-in will drive up costs for consumers, entangle them in red tape and reduce their access to advice.
With the late arrival of the draft legislation and the key date of 1/7/2012 still in place, it is critical that issues are resolved as soon as possible or that the implementation date is deferred.
The well-being of Australian consumers is at stake – that is the focus of the AFA’s position. We are looking forward to debating the draft legislation with all key stakeholders. We will also continue to encourage our members to “maintain the rage” with their local MPs across the country.
