Australians will soon have better access to affordable and quality financial advice following the passing of the Future of Financial Advice (FOFA) legislation through the House of Representatives today.
“These historic reforms complement the Government’s historic boost to superannuation, by ensuring that money is managed in the interests of consumers,” Minister for Financial Services Bill Shorten said.
“Put simply, FOFA means more money will be better managed.”
The Gillard Government’s FOFA reforms are designed to tackle conflicts of interest that have threatened the quality of financial advice and increase access to advice, by making it easier to provide limited or scaled advice.
ASIC research shows that only 20 to 40 per cent of Australia's adult population use or have used a financial adviser. This is expected to increase now due to increased consumer confidence and flexibility that the new laws will enable.
By building trust and confidence in financial advice, FOFA is a growth strategy for the industry.
"It has been a significant concern for the Government that so few Australians access financial advice, when so many of them could be benefit from it. These reforms will increase trust and confidence in the sector and remove the red tape that has prevented low-cost, good quality advice being delivered to millions of Australians."
Opt-in and industry code
The Government is today making some additional changes to the opt-in aspects of the FOFA Bill to provide greater flexibility to industry whilst ensuring consumer protection is maintained.
The opt-in obligation requires financial advisers to renew their clients’ agreement to ongoing fees every two-years. While this is an important protection to ensure clients do not pay open-ended, ongoing fees while receiving little or no service, some parts of industry argue this requirement is unnecessary where advisers are members of professional bodies or professional codes which obviate the need for opt-in (for example, if a code requires advisers provide an ongoing service to clients if they charge an ongoing fee).
The Government will give ASIC the ability to exempt advisers from the opt-in obligation if they are satisfied that the adviser is signed up to a professional code which obviates the need for opt-in.
This ensures that consumers are adequately protected – either by a professional body, or failing that, the opt-in provisions in the law.
"The ongoing consultation around these reforms has been lengthy and at times challenging.
I’d like to acknowledge the strong work of the Member for Lyne and the Member for New England.
I’d like to acknowledge the hard work and determination of my Ministerial predecessors, the Honourable Chris Bowen and Senator Nick Sherry. I’d also like to acknowledge the Member for Oxley, Bernie Ripoll who has had a strong interest in better outcomes in the financial advice industry.
But reform of this magnitude would not have been possible without the efforts of those outside this place.
I’d also like to thank the Department of Treasury, ASIC, Choice, the Financial Planning Association, the Financial Services Council and Industry Super Network.”
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