FoFA – Acting Assistant Treasurer Announces Way Forward

On 20 June 2014, Senator the Hon Mathias Cormann, Minister for Finance and Acting Assistant Treasurer, announced the go forward position on financial advice laws known as FoFA.  After a further period of consultation with stakeholders and industry participants Senator Cormann stated the right balance had to be achieved between appropriate levels of consumer protection and access to affordable and scaleable financial advice.  The Government has consistently stated that the original FoFA Reforms as proposed by the former Labor Government had failed to strike this balance.

Where legally possible some of the reforms will take effect from 1 July 2014 by the Government exercising its power to make regulations.  Pending further debate by Parliament on some key changes, additional measures will take effect between 1 July 2014 and 31 December 2015. This includes:

  • Removal of the ‘opt in” requirement which requires investors to provide written agreements every 2 years in order to confirm continuity with on-going fee arrangements;
  • Removal of the ‘catch all’ provision in relation to an adviser acting in the best interests of his or her client;
  • Improved access to scaled advice to enable more affordable advice;
  • Removal of the requirement to send fee-disclosure statements for pre 1 July 2013 clients.

With the ban on commission/conflicted remuneration, Senator Cormann stated that payments under a balanced scorecard method for general advice,  where they do no conflict with advice would be permitted but they cannot be be up-front or trail commissions.

 

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