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Advisers applaud "historic" ban on commissions

Advisers applaud "historic" ban on commissions
Financial advice associations and the Financial Services Council (FSC) have applauded the "historic" ban on commissions in general advice and welcomed the government's changes to the Future of Financial Advice (FoFA) law.

"We are extraordinarily pleased, we have fought very hard to ensure that trailing commissions were banned from general advice," the Financial Planning Association (FPA) chief executive Mark Rantall said.

Rantall spoke shortly after Minister for Finance Mathias Cormann issued a response statement to the Senate Economics Committee report on the government's proposed changes to FoFA.

"It is a historic day: commissions have been banned in Australia and we can be proud of that," said Rantall, whose organisation has actively lobbied against a potential comeback of commissions in general advice.

"We never had any problems with paying commission bonuses through balance scorecard arrangements; that happens in any business," he said.

The FSC chief executive John Brogden said that the changes were "balanced" and added that they "address consumer concern about the commissions' exemption in general advice."

"The government is making it clear that they are amending the regulation to ban commissions," Brogden noted.

Asked about the difficulties that the Coalition might find to pass the legislation through the Senate, Brogden said that the ban on commissions "giver the opposition a moment of thought to rethink their position."

Labor and the Greens, who have so far opposed the government's proposed changes to FoFA, will likely wait until the final legislation is tabled in Parliament, but Brogden noted that Cormann's statement already shows "a significant change."

Brogden stressed that controversial measures such as the removal of the catch-all provision in the best interests' duty do not lower consumer protection.

"There has been a malicious misinformation campaign," he said, and added that the protections in the current law make it "almost impossible to imagine that large financial scandals could happen again."

The Association of Financial Advisers (AFA) chief executive Brad Fox said that "the catch-all phrase did not add to consumer protection, it merely increased uncertainty for advisers, which meant the cost of providing advice has risen."

Fox also welcomed the government's support to a longtime AFA request of extending the notice period to provide Fee Disclosure Statements (FDS)'s increased from 30 days to 60 days.

Author :Laura Millan
Source Financial Standard
Last modified onMonday, 23 June 2014 05:02

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