In 2009, a Parliamentary Joint Committee inquiry was conducted
into financial products and services in Australia following the
collapse of companies including Storm Financial and Opes Prime. In
response, the Government introduced the Future of Financial Advice
(FoFA) reforms which commenced on 1 July 2012, with the view of
improving investor protection and the quality of financial
The reforms are voluntary until 1 July 2013. The reforms only
apply to financial advice provided to retail clients.
The legislation implementing the reforms comprises two separate
but related bills:
Corporations Amendment (Future of Financial Advice) Bill
Opt-in and Fee Disclosure provisions
Applies if personal advice is provided to clients who are
paying ongoing fees for 12 months or more;
Advisers must request retail clients to opt-in or renew their
advice agreements every two years; and provide an annual statement
outlining fees and charged and services provided in the previous 12
The effect is to increase the level of regular contact the
adviser has with their client and demonstrate the value of services
they are providing.
The Bill also enhances ASIC's licensing and banning
Corporations Amendment (Further Future of Financial Advice
Measures) Bill 2011
This Bill imposes a "best interests" duty.
The Bill also bans conflicted remuneration as follows:
Licensees and authorised representatives will not be allowed to
give or receive payments or non monetary benefits if they could
reasonably be expected to influence financial product
recommendations or advice given to retail clients;
Payments made under arrangements or contracts entered into
before the reforms commence will not be affected.
These prohibitions apply to both personal advice and general
advice (advice on products which are not tailored to an
individual's personal circumstances).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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