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.