Speaking at the Financial Advice in Super Symposium in Melbourne, hosted by the ISA, Mr Whiteley said the proposed amendments to FOFA regime will result in a “worse” regulatory environment than existed pre-FOFA.
“Under the amendments, should they go through, a financial planner will be able to meet the revised best interests test without taking into account the client’s best interests,” he said.
“This is the exemplar of fine print in an industry known for fine print,” said Mr Whiteley.
Under the changes, once a financial planner and their client agree upon the scope of the advice it will only have to be ‘appropriate’ rather than in the clients’ best interests, he said.
“This is what AMP received an enforceable undertaking for in 2006. It was something the previous Howard government refused to accommodate by changing the legislation at the time,” said Mr Whiteley.
The amendments also allow volume rebate via the changes to commissions on insurance, as well as allowing financial advisers to charge ongoing financial advice fees without providing financial advice (via the removal of the biennial ‘opt-in’ requirement), he said.
“We don’t regard these as tweaks, we regard them as overreach,” he said.
The ISA recognised that the Coalition government was likely to be elected and amend the FOFA regulation, said Mr Whiteley.
“But what we’ve seen under the change of government is an extraordinary and unseemly scramble by the industry to wind these reforms back – without a great deal of thought about what the logical outcome might be,” he said.
When it came to the changes in the rules around scaled advice, Mr Whiteley latched onto an earlier example provided by his fellow panel member Financial Services Council chief executive John Brogden about a hypothetical client with $50,000 windfall to invest.
If the client decided “down the pub with their mates” that they wanted to invest the money in shares, the adviser and the client can agree on the scope of the advice as soon as the money goes into the sharemarket, said Mr Whiteley.
“The advice that the adviser provided would from then on need only be appropriate to investing in shares,” he said.
“The adviser would not need to ask them if they had a $40,000 credit card bill – the advice could be scoped about the investment in shares and never ask about the credit card bill,” said Mr Whiteley.
“Now if we think that’s alright: fine. But that’s what these changes deliver, and that is not professionalism,” he said.
