The Federal Government has made a number of key changes to its Future of Financial Advice (FOFA) reforms including extending opt-in over a two year period and banning all commissions on risk insurance inside super.
The Assistant Treasurer and Minister for Financial Services Bill Shorten announced the changes today.
The key elements of the reforms include a requirement for financial advisers to sign clients to opt-in every two years if they wish to continue to receive ongoing advice, a ban on up-front and trailing commissions and like payments for both individual and group risk within superannuation from 1 July 2013, a broad ban on volume-based payments, and the introduction of scaled advice, Shorten said.
However, the FOFA changes do not extend to a ban on conflicted remuneration to risk insurance outside of super, he said.
"These reforms are designed to provide further protections for consumers of financial advice and to restore trust in the system following the collapse of Storm, Trio, Westpoint and other financial service providers," he said.
"It will also provide more certainty to the financial advice profession, which has been closely engaged in the consultation process.
"The vast majority of financial advisers are dedicated professionals who give good advice to the best of their ability. But that doesn't change the fact that many consumers lack trust in the profession and there is a perception that advice is under-regulated and open to abuse."
The FOFA changes also include a ban on any soft-dollar benefit that is $300 or more, per benefit, from 1 July 2012. This excludes professional development and information technology administration services where set criteria are met, Shorten said.
He said Treasury will also provide the government with a recommendation as to whether the term financial planner or adviser should be defined in the Corporations Act and its use restricted.
"Some stakeholders have argued that restricting the use of the term 'financial planner/adviser' would carry consumer protection benefits, including that consumers would have a clearer understanding of whether a planner or adviser has met certain educational and professional standards," he said.
"Against this, there are concerns that it may create a regulatory barrier to entry and unnecessarily increase the cost of advice."
Shorten said consultation on each of the elements will continue to resolve any outstanding issues as part of the development of legislation.
The government is expected to release draft legislation for public comment after the middle of this year.
