The comments follow the Coalition’s announcement to proceed with the amendments to FOFA on Friday.
The consumer group said the amendments to the FOFA reforms would mean the removal of “critical consumer protections”.
Choice chief executive Alan Kirkland said conflicted and poor financial advice has cost consumers billions and in too many cases led to people losing their homes and life savings.
“This is why consumer protections were originally needed and exactly why they should not be removed,” said Mr Kirkland.
“Now more than ever, consumers need professional financial advice to help them save for their retirement, not advice distorted by hidden fees and advisers pushing products that don’t meet their needs.”
Mr Kirkland said while the government claims it is improving the best obligation, it is actually “removing a professional duty for advisers”.
“You don’t go to a doctor expecting them to follow a checklist of tasks – you expect them to use their professional judgment to find the best solution for you,” he said.
“It should be the same for financial advisers.”
Choice said it was alarmed by the government’s decision to remove the requirement that clients ‘opt-in’ to fees charged by advisers.
“One of the biggest problems in the investment industry has been clients being charged fees for years after the adviser has stopped providing advice,” said Mr Kirkland.
“The requirement that clients consent to these fees every two years is an important way to make sure investment income is not eroded by fees.”
Industry Super Australia (ISA) also opposes the FOFA amendments stating that the “government proposals reflect a significant weakening of consumer protections and permit a range of kickbacks such as volume-based and wholesale commissions, bonuses, soft-dollar commissions and commission-like percentage based fees”.
ISA chief executive David Whiteley said the ISA is concerned that if a “wind-back of consumer protections were to eventuate, financial advice and product sales would once again be inseparable and consumer confidence in financial planners would be even further reduced”.
“The government’s proposals, lobbied for by banks and financial planners, will create caveats and loopholes – consumer protections should be ironclad, not subject to fine print.”
