The federal government has no intention of compensating licensees or financial planners in the event its Future of Financial Advice (FOFA) reforms cause them financial losses.
At an Association of Financial Advisers (AFA) luncheon yesterday, Financial Services and Superannuation Minister Bill Shorten said the government’s three-year FOFA reform transition period was enough time for participants to be reform ready, and therefore no compensation would be required.
“No, we’re proposing a three-year plus transition timetable. There are a lot of workers who are in call centres, or manufacturing or banks and they don’t get three years to adjust to change,” Shorten said.
“We don’t believe this is going to lead to wholesale exits from the industry.”
While he said he understood some participants were “cranky” about the government changing its opt-in reform and potentially losing a stream of income on insurance products in superannuation, there were other important issues for the industry to focus on.
“I’m crankier about the fact that two in 10 Australians get financial advice. I’m crankier about the fact that the Liberals won’t increase superannuation from nine to 12 per cent,” he said.
“I’m crankier about the fact that compulsory superannuation has delivered a whole lot of revenue to the financial planning industry, yet when you say they should decrease their fees and charges on people’s accounts, it’s like breaking one of the 10 commandments.”
In the government’s view, the FOFA reform of opt-in will not create an onerous financial burden on the industry.
“I do not accept the proposition that asking clients for a new mandate every two years is beating financial planners to a pulp. I just don’t get that, I just don’t accept that and I haven’t been persuaded by any of your advocates on that point,” he said.
“I hear people say well just make it opt-up, my point about that is that I suspect most of you in your practices liaise with your clients much more periodically than every two years and I don’t believe it is testing the systems of modern practices to be able to periodically seek a renewed mandate.
“I live in the real world, but you guys haven’t convinced me on how opt-in is the end of your practice.”
He said change was inevitable and the key focus should be on how the industry changed for the better and to stop the disagreements between the retail and industry superannution funds.
“As the Minister, despite what you think of corporate funds, or what people and unions think about industry funds or what some planners think about retail funds or what some accountants think about SMSFs (self-managed superannuation funds), I’m not about picking winners. I want them all to perform,” he said.
The government expects to deliver its draft FOFA legislation in August.
