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Surprise attack: Coalition unleashes $130b hit on retirement incomes

The government has handed the banking cartel and dinosaur financial planners a major win with a package to repeal Labor’s Future of Financial Advice reforms, released this morning by Assistant Treasurer Arthur Sinodinos.

Sinodinos proposes to dump the “opt-in” requirement for financial advice fees, which would have prevented financial planners from automatically collecting fees every year for advice clients have never sought, remove requirements for advisers to disclose fees to existing clients, make the duty to act in the best interests of clients easier to meet, dramatically water down the ban on advisers receiving “conflicted remuneration” for products they push clients into, and extend exemptions grandfathered into the “conflicted remuneration” rules.

If successful, the dumping of the FOFA reforms would be a big blow to consumers’ rights to access independent advice and not be gouged by financial planners exploiting Australians’ lack of interest in engaging on their superannuation. Clients will miss out on up to $130 billion in retirement savings while a minority of dinosaur financial planners, who are happy to exploit clients’ lack of interest and rely on platforms provided by the banking cartel which consistently underperform compared to industry super funds, get the benefit.

The changes almost certainly guarantee a repeat of the financial advice scandals that erupted around the global financial crisis, with thousands of clients of outfits like Storm and Westpoint losing their life savings based on bad, conflicted advice from planners.

A large segment of the financial planning industry has long since rejected the commission-based remuneration model and begun offering professional, fee-for-service advice. However, a minority of holdouts opposed FOFA as a threat to their revenue models, in which they pushed clients into retail funds operated by the big banks for which they received trail commissions and collected fees for advice never sought by clients after an initial consultation. Opt-in — which requires clients to opt into ongoing advice arrangements every two years — and the ban on conflicted remuneration, as well as a new requirement for planners to always act in the best interests of clients, were at the heart of the FOFA reforms Bill Shorten steered through Parliament earlier this year, with some compromises to get them past the crossbench MPs in the House of Representatives.

The Coalition, which bases its financial services policy on a profound malice toward industry superannuation and whatever deadender financial planners demand, is now set to tear that down and return us to the bad old days that gave us so many financial scandals and miserable retirements.

It’s a low, shabby act of politicking from the Coalition, and one that will cost a huge number of Australians dearly when they come to retire. Stopping it will be a key battle in the Senate in 2014 — both before and after the new Senate commences in July.

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Categories: Federal, Markets

16 Responses

Comments page: 1 |
  1. The government deserves full points for consistency ie: everything they’ve touched since Sept 7 has shown poor - or appalling - judgement. Each day delivers a freshly minted gaffe from Cabinet.

    by zut alors on Dec 20, 2013 at 2:43 pm

  2. How will they sell these changes to the public?

    Labor is going to make much of this when it comes before the senate and they’ll have the people’s interest on their side, while the Liberals will have greedy and deceptive financial planners cheering for them.

    And when you add this to the emerging Renewable Energy Target walk back and the CEFC repeal, the government is at risk of looking too nakedly ideological for voters.

    I get the impression that the Liberals are so beholden to business interests that they can’t put their own political imperatives ahead of them. The business sector wants to cash in their favours and don’t care if it cripples the government, and Abbott just goes “OK” as if he’s soaring in the polls.

    Well, so be it.

    by arctic winds on Dec 20, 2013 at 2:47 pm

  3. Is this reporting opinion or lobbying?

    by Philip Bond on Dec 20, 2013 at 3:37 pm

  4. ZA, you have said it in one. Thank you BK for this insight into the latest example of LNP chicanery and looking after their mates.
    The only things still to come are “workplace reform” and maybe rescind the plain paper packaging on ciggy’s. Where is the media highlighting this ineptitude (apart from the ABC)?
    Come the next election one would hope Labour can capitalise on this situation; revolution now.

    by MJPC on Dec 20, 2013 at 4:14 pm

  5. Financial advisers are nothing but commission agents and 3rd party contrivers to be avoided. Iff you took into account the fees over 5 years you could afford to lose that amount and still be in front.There are too many traps in the financial advising industry
    and with all their disclaimers you end up the mug iff it all goes pear shaped and they get your hard earned. It is a relatively new industry set up by the smarties of the financial institutions to bleed you of your savings. After the GFC I went to buy a new car and asked the salesman what he did before he sold cars. he said he was a financial adviser.

    by LWW305 on Dec 20, 2013 at 7:55 pm

  6. What could be the possible rationale for this.. It’s just seems ludicrous. Every single day it’s another repeal, another abolition. This government is surely determined to undo every single thing Labor did, irrespective of whether it is sound policy. It’s ideological cleansing .

    by Buddy on Dec 20, 2013 at 8:18 pm

  7. Buddy, it’s looking after their mates as usual for the Tories: Revolution now!

    by MJPC on Dec 21, 2013 at 9:02 am

  8. Your kidding
    Who would head that? Rudd, Gillard,Shorten,Obeid,Maybe someone from the HWU.
    idiot.

    by LWW305 on Dec 21, 2013 at 12:07 pm

  9. Again ruling in the interests of their finders. Cynically the FOFA reforms were delayed and delayed by the industry so that they could be repealed by an incoming LibNat government.
    Next time your superannuation fund offers advice ask these questions
    1 does the Financial Advisor have a Cert Level 3 minimum qualification in providing financial advice?
    2. What money do they or their company get from each product (managed fund etc) they are selling you when you agree and in the coming years? And
    3 is the return they are talking about before or after they take their slice as a fee? How much in Dollars did they take last year and hope to take this year?
    These were the FOFA reforms and now you will have to do it yourself.
    Remember each dollar that the financial industry takes from YOUR super can mean a loss of thousands of dollars (remember compound interest at primary school, see google) when you come to retire.
    The FOFA reforms were about stopping rip offs ofmthe average joe. Tthis government has just given back a huge ripoff to a small number of very rich people and companies.

    by Daly on Dec 23, 2013 at 1:32 pm

  10. Sorry funders

    by Daly on Dec 23, 2013 at 1:33 pm

  11. Where would average people like myself find this out if I had not bothered to log into Crikey today.

    Thankyou Crikey and Bernard Keane for keeping us Joe Blows informed and up to date. Can’t believe the coalition could be so damn miserable and conniving.

    by Hashnah Civeli on Dec 23, 2013 at 6:25 pm

  12. This government is so odd. It’s almost as if they wake up each morning with no awareness of what they said or did the day before … or even what side of politics they’re on. Sometimes the rhetoric even sounds unashamedly ‘left’ (“no more corporate welfare!”).

    I just can’t follow what they’re trying to achieve, if anything, besides utter chaos. This isn’t so much government as it is theatre sports.

    by Joe Fitzpatrick on Dec 24, 2013 at 8:28 am

  13. Joe. Utter chaos,theatre sports. Are you sure your not talking about the previous government. Its Christmas time when we all wake up each morning with no awareness of what we said or did the day before. ” just can’t follow what they’re trying to achieve,”
    Stay tuned.

    by LWW305 on Dec 24, 2013 at 11:43 am

  14. Can anyone explain to me why they are doing this? (apart from the ‘mates’ angle).

    by macca on Dec 29, 2013 at 10:04 pm

  15. The author has nailed the public interest on this one.
    Very important implications for all Australians.
    Is there room for a private “oversight agency”, in the manner of those insurance information service companies?

    by Hamis Hill on Jan 3, 2014 at 8:42 pm

  16. It is disappointing as again the defrauding of mum and dad investors will be open sesame again. When I retired a few years back you coil not imagine the number of unsolicited invitations/ gifts/ I received to help me invest my super. The Financial advice industry are just fast buck sharks and where ponsie get rich schemes are not uncommon. This legislation would have curbed this but another on Abbott’s Dollarocracy debits repaid. The main beneficiaries will be the banks and they always work in their interest and not their customers.

    by tonyfunnywalker on Jan 5, 2014 at 6:21 pm

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