Jul 23, 2014

Why you should care about FoFA, even if you have no money to manage

The government's Future of Financial Advice reforms are law (just about). But what do they actually mean? And if you don't have a financial adviser, why should you care? Crikey's business editor breaks it down.

Paddy Manning

Crikey business editor

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. What’s changed?

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7 thoughts on “Why you should care about FoFA, even if you have no money to manage

  1. Brian Williams

    One of the most despicable actions undertaken by any Australian government in recent memory.

  2. SusieQ

    Its so obvious that the government is pandering to the big banks and yet has done nothing about the CBA scandal – how silly do they think we all are?

  3. Daly

    This disgraceful rip off of ordinary Aussie’s compulsory superannuation, unbeknownst to them, was stalled by the finance sector and banks for the whole time of the ALP governments. They were waiting for the LibNats who just did their bidding.
    It is corruption. I like the idea that each financial advisor sends a monthly or quarterly bill, including tails etc, to each client for the services provided. It wouldn’t take long for the whole mess to be cleaned up and the financial services sector to start earning incomes like the rest of us instead do being millionaires off the backs of average wage earners.

  4. bushby jane

    Palmer has got a lot of dirt on his hands over this too.

  5. Anna Power

    If we had reasonable journalism in the tabloid format more ordinary Australians could be informed of the disgraceful exploitation they are experiencing unbeknownst to them. Where is A Current Affair when you really have a story of wide scale ripping off ?

  6. Liamj

    Thanks for summary PM, keep it up. Agree with all that is it despicable pandering by LNP & PUP.

    Upside: its powerful ammo for engaging with elderly fools who say ‘theres no difference between the major parties’.

  7. MJPC

    Excellent article for excplaining this sorry spectacle. Where is the mainstream media analysis such as this? No, their owners are adverse to criticise their major advertisers. When the next scandle breaks (and it will) who will they blame?
    Capitalism is a curse where citizenry pay for the mistakes of the rich.

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