The much anticipated proposals to unwind parts of the Future of
Financial Advice (FoFA) legislative regime have been announced by
the Coalition Government. The announcement is likely to have a
mixed reaction from the industry with many having already invested
heavily in getting their systems and procedures ready for FoFA.
here for a link to the Government's announcement.
SUMMARY OF THE PROPOSED AMENDMENTS TO FOFA REGIME
The Coalition Government maintains that the proposals aim to
increase certainty in the financial advice industry, and to reduce
costs and red tape for small businesses, financial advisers and
consumers who access financial advice. The proposals are
far-reaching and the devil will be in the detail.
Some commentators have already criticised the Coalition's
decision to unwind parts of the FoFA legislative regime. It is
difficult to argue against the policy rationale for FoFA which is
centred on restoring integrity in the financial planning industry
and allowing investors to obtain financial advice that is in their
best interests. Indeed, many parts of the financial planning
industry have incurred considerable costs in getting ready for FoFA
as legislated by the previous Government.
The Coalition Government's proposals resemble comments made
by the Coalition in response to the 2012 Parliamentary Joint
Committee inquiry into FoFA. A list of the proposals is summarised
in the table below.
Removal of the 'opt-in'
Remove the opt-in requirements so that advisers no longer need
to seek their client's agreement every two years.
Annual fee disclosure
Fee disclosure statements will only need to be provided to new
Greater certainty to the best interests
Remove the catch-all provisions (eg s961B(2)(g) of the
Amend the best interest duty to allow for the provision of
Amend grandfathering provisions to allow advisers to move
between licensees whilst continuing to access grandfathering
Exempting general advice from conflicted
The ban on conflicted remuneration will only apply to personal
Life insurance inside super
The ban on conflicted remuneration will only apply to
commissions on risk (life) insurance products inside superannuation
when no personal financial advice about these products has been
Other amendments to conflicted
allow for the payment of benefits under "balanced"
expand the basic banking exemption to include all simple (i.e.
"Tier 2") banking products; and
permit the payment of performance bonuses which are calculated
by reference to remuneration which is exempt from the ban on
Introduce a causal link into the exemption so that benefits are
permitted where no advice has been provided to the client by the
individual performing the execution service in the previous 12
Broaden the existing training exemption to include other forms
of training relevant to conducting a financial services
Clarify that incentive payments between fund managers and
platform operators for preferential treatment of certain products
on the platform "shelf" are banned.
Define intra-fund advice
The definition of intra-fund advice will be referenced in the
Clarification of the existing stock-broking exemption to
include the application of the stamping fee exemption to initial
purchase offer arrangements.
In additional to the above, minor amendments will be made to the
FoFA legislation to address technical issues and clarify the
legislation. The Government also proposes to make consequential
amendments to the application of the wholesale and retail client
It remains to be seen whether the proposals will be able to
strike an adequate balance between the interests of investors and
financial planners to bring about the "certainty and
stability" flagged in the Government's announcement.
No draft legislation has been provided at this stage but it is
expected that any amendments will follow a consultation process in
We will report on further developments in this area, and are
available to assist you or provide you with further information.
Please contact a member of our team listed in this publication.
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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