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Government limits general advice exemption in FoFA amendments

Government limits general advice exemption in FoFA amendments
The Future of Financial Advice (FoFA) amendments bill that was introduced into the Parliament yesterday has limited the general advice exemption, but does not explicitly forbid commissions.

The Corporations Amendment (Streamlining of FoFA) Bill 2014 did address the issue of conflicted remuneration in general advice.

The government has maintained its initial proposal to exempt general advice from conflicted remuneration.

The bill said the measure "imposes unnecessary burdens on industry by capturing individuals not directly involved in providing advice to clients."

However, the bill limited the exemption to employees working under a financial services licensee and advising retail clients.

The employee must have not provided personal advice to retail clients in the last 12 months, and financial product recommended must be issued or sold by the licensee.

The Australian Securities and Investments Commission (ASIC) will monitor the use of conflicted remuneration provisions related to general advice on complex products and will report to the government in the next 12 to 18 months.

The government has left the door open to introduce limited regulation "to address future remuneration structures that may be inadvertently captured by the ban on conflicted remuneration," the bill said.

"Technically, it doesn't remove the possibility of reintroducing commissions, but it limits it and makes it unlikely that they come back," the Financial Planning Association (FPA) general manager of policy and government relations Dante De Gori told Financial Standard.

"We would have liked to see an explicit prohibition of commissions in general advice," the FPA chief executive Mark Rantall said.

The bill also introduced the removal of the opt-in requirement, the removal of the retrospective application of fee disclosure statements and the removal of the "catch all" definition of the advisers' best interest duty under section 961B(1) of the Corporations Act.

The industry welcomed the fact that the government put "on hold" the decision to introduce amendments to permit adviser commissions in insurance through super.

Treasury will be conducting a consultation process on the life insurance sector in the coming months.

"In order to ensure that the industry's regulatory environment is not subject to further change while this process is underway, the Government does not propose to progress amendments to the treatment of life (risk) insurance at this time," the bill said.

Author: Laura Millan 
Source: Financial Standard

 

Last modified onThursday, 20 March 2014 05:18

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