After Clive Palmer backed down last week the government’s Future of Financial Advice (FoFA) reforms are law … well, sort of. We take you through the nitty-gritty in the law -- what's changed, and what it means.
What is happening with the act?
We are in a very curious position: the normal legislative process is working in reverse! On June 30, when the government realised it didn’t have the numbers in the Senate, Finance Minister Mathias Cormann circumvented the Parliament and bought time by issuing interim regulations, which gave legal effect to the FoFA reforms from July 1 until the end of 2015. Labor and the Greens tried to disallow the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014
but failed last Wednesday when the Palmer United Party voted with the government. The government still has to pass the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014,
incorporating minor changes requested by Palmer, as was flagged in a media release
. At that point the relevant provisions of the regulations will transfer into the act.
I don't have a financial adviser, why should I care?
Choice campaigns manager Erin Turner says the government’s FoFA wind-back will affect all Australians, firstly through economy-wide impacts -- ASIC estimates consumers lost $5.7 billion between 2006-10 as a result of financial advice scandals from Westpoint to Commonwealth Financial Planning, losing their homes and life savings -- and secondly through a loss of trust in our largest financial institutions, which will be giving more unsolicited, general advice. “From now on, whenever you walk into a bank, the tellers are going to be incentivised, more than ever, to provide general advice and steer you towards certain products, as part of their bonus,” Turner said. Her recommendation? Exercise extreme caution. The playing field has tilted, back to the advisers.
Best interest test