Australia's two biggest banks are urging the government to push ahead with its controversial plan to roll back part of Labor's financial advice reforms, claiming the current rules will make advice too costly for many households.
After the Coalition paused in its plan to soften the Future of Financial Advice laws in March, the Commonwealth Bank and Westpac have made fresh calls for the government to stick to its initial plan.
Under the government's changes, which were put on hold after Senator Arthur Sinodinos stepped aside as Assistant Treasurer, "general" advice would be excluded from a ban on commissions.
Banks are tipped to gain from the change, but the big four played a low-key role in the debate earlier this year, declining to make public submissions on the amendments.
Now, in a submission lodged last week, CBA's wealth management arm said the roll-back should be ''legislated without delay''.
It said Labor's laws had created high levels of uncertainty and complexity for the industry and this would push up costs and make advice more expensive.
Critics say the FoFA roll-back will fundamentally weaken consumer protections, but CBA's submission described the government's planned changes as ''largely technical'' amendments that would help to make advice more affordable. It quoted estimates that the typical cost of full-service financial advice was $2400, or $1100 for "more limited advice" – amounts it said were more than most are willing to pay.
''These refinements achieve an appropriate balance between consumers' best interests, making advice more accessible and affordable for all Australians and reducing unnecessary red tape,'' the bank told the Senate economics committee.
The CBA submission comes after the bank last week faced fresh scrutiny over the role of its financial planning division, with a Fairfax/ABC investigation revealing the bank refused to pay out a life insurance policy claim to a man dying of cancer, Noel Stevens.
Westpac also argued the proposed changes to FoFA were necessary on social equity grounds.
It cited industry-commissioned research from Britain that found many people were reluctant to pay for advice up front. The UK last year implemented rules replacing commissions for advice with other payment methods.
"While strengthening the regulation of financial advice is necessary, a careful balance needs to be struck to ensure that advice is not something only the wealthy can afford," Westpac said.
The government has said that rolling back several parts of FoFA would save the industry $190 million a year by cutting "red tape".
But in March it announced a "pause" in the amendments, after Senator Sinodinos stepped aside for the duration of a NSW corruption investigation into a company he previously chaired. The changes are now being examined by the Senate economics committee.
A submission from Choice argued the government's changes should be abandoned, saying cost savings were not worthwhile if they meant a return to conflicted payments and advice that was not in the best interest of customers.
CBA dismissed criticisms from consumer groups and some planners that commissions for general advice would be a step backwards. Instead, CBA argued that exempting ''general advice'' from the ban on conflicted payments was ''essential to facilitating greater access to information and basic advice".
The bank also threw its support behind changes to allow for ''scaled'' advice that focuses on one narrow issue, such as investing in the sharemarket without considering a client's broader financial circumstances.
CBA argued this scaled advice was ''critical to permit increased access to affordable and quality financial advice in the community''.
The public submissions could signify the banks intend to mount a stronger campaign for the FoFA changes, which would benefit their wealth divisions. None of the big banks made public submissions on the government's FoFA rollback draft legislation.Author : Clancy YeatesSource : Sydney Morning Herald