Financial advice and wealth management participants have lauded the federal government’s decision to postpone compliance with its reform package to 1 July 2013, but said they planned to continue pushing to win other changes to the draft laws.
“It’s a vote for common sense and practicality,” FPA chief executive Mark Rantall said.
Association of Financial Advisers (AFA) chief executive Richard Klipin praised the industry’s collective efforts for ensuring that common sense prevailed.
“We trust this spirit of compromise, which is so necessary for the implementation of good policy, will continue,” Klipin said.
Financial Services Minister Bill Shorten confirmed yesterday the nation’s financial advisers and wealth managers would have an extra year to meet Future of Financial Advice (FOFA) requirements.
Shorten said in a statement any business that wanted to start complying with FOFA reforms could do so voluntarily until 1 July, 2013.
“From 1 July, 2013, the entire industry will be required to comply,” he said.
Financial services participants had been calling for the 2013 start date to give the industry time to prepare for the reforms and save money.
“FOFA will drive significant structural changes across the industry, costing $700 million upfront to implement and $375 million each year in ongoing costs,” Financial Services Council chief executive John Brogden said.
He added the transition period would align the start of FOFA compliance with MySuper reforms, the government’s plan to provide low-cost retirement savings mechanisms for more Australians.
Association of Superannuation Funds of Australia chief executive Pauline Vamos said the industry’s many changes opened the way for mistakes if rushed.
“Having more time to implement the reforms will allow funds to produce better thought-out project plans, meet the challenges of staffing constraints, and prevent rushing to meet deadlines that could potentially increase the risk of error,” Vamos said.
The nation’s largest wealth managers and advice networks, including AMP, BT Financial Group and MLC expressed support for the move.
“Minister Shorten’s flexible commencement arrangements will provide welcome relief for the industry,” National Australia Bank wealth group executive Steve Tucker said.
Tucker called the outcome ‘sensible’ because it gave the industry time to overhaul technology systems and processes ‘to support financial advisers with the transition to FOFA and implement the reforms in a seamless way’.
Rantall said FPA members would maintain their 1 July 2012 deadline for banning commissions on new clients’ investments.
“Having said that, we are still working hard to lobby government and independents to facilitate changes [to FOFA], specifically to remove retrospective additional disclosure statements, to remove opt-in, and to modify the best-interest duty to enable scaled advice to be implemented,” he said.
Opposition assistant treasury spokesman Mathias Cormann called on Shorten to adopt other recommendations made by the coalition, including the removal of opt-in, for clearer expression of the best interests duty.
Cormann has also said he wants a proper regulatory assessment of FOFA before the draft legislation is considered by Parliament.
The first and second tranches of the Corporations Amendment (Future of Financial Advice) Bill 2011 are likely to be debated next week in the House of Representatives.
