Coalition to wind back rules on financial planning industry
The financial planning industry is poised for more change because the Coalition intends to wind back rules introduced after the Storm Financial and Trio Capital collapses, including a requirement that planners act in their clients' best interests.
The government is also expected to compel financial planners to disclose who owns their businesses. This follows a spate of consolidation and complaints that existing laws make it hard for independent planners to compete.
The previous government's Future of Financial Advice (FoFA) laws pared back certain payments by financial product providers to financial advisers, and required planners to act in their clients' best interests and sign a new contract with them every two years.
The package was broadly bipartisan, and was watered down by Labor at the last minute. The Coalition has long signalled its plans to remove the two-year "opt-in" requirement, arguing it was initiated by the industry superannuation lobby group.
Among 16 planned changes, the government has promised to alter annual fee disclosure requirements and the ban on commissions on risk insurance inside superannuation.
Association of Independently Owned Financial Professionals executive director Peter Johnston said the requirement for planners to act in their clients' best interest was not a problem. Rather, the ability of banks, super funds and accounting firms to cross-subsidise their financial planning operations disadvantaged independent planners, he said.
In 2009, the Australian Securities and Investments Commission urged "a fiduciary style duty to act in the best interests of clients, and where there is a conflict between the adviser's interests and the client's interests, prefer the interests of the client".
It has since recommended that financial advisers must pass a national examination, and that firms should check their advisers' credentials to prevent the "bad apples" operating in the industry. In contrast, Treasury warned years ago that a clampdown on conflicted payments risked making financial advice too expensive for many people.
"The requirement for a fee-only structure could contract the advice market, and this contraction may fall largely on less-affluent clients who are unable to pay upfront fees," Treasury said.
Removing opt-in requirements will probably disappoint consumer group Choice, which says the FoFA policy was a "very strong safeguard for new clients". Listed independent financial planning firm SFG says it has dealt with an unprecedented volume of regulatory change in the past year.