CHOICE says consumers have more reason to be confident in the financial advice they receive, with the successful passage in the Senate of the Future of Financial Advice (FoFA) reforms.
The legislation means a prospective ban on conflicted remuneration structures.
This includes a ban on commissions and volume based payments in relation to most invesment related financial products sold to consumers.
The passage of the bill also signals the introduction of a statutory fiduciary duty, meaning that financial advisors have to act in the best interests of their clients, subject to a ‘reasonable steps’ qualification.
“This is a big win for consumers because advisors are now obliged to put the interests of their clients ahead of their own when providing financial advice,” says CHOICE Chair, Jenni Mack.
CHOICE says the FoFA reforms herald increased transparency and flexibility of payments for financial advice, by introducing ‘adviser charging’ that aligns the interests of the financial advisor and the client.
“Advisor charging will be clear and product-neutral, with the investor able to opt in to the advice in response to a compulsory, annual renewal notice.
“The reforms will also expand the availability of low-cost ‘simple advice’ to make it possible for more people to access affordable financial advice,” says Ms Mack.
CHOICE says the FoFA reforms take into account the concerns of the financial advice industry by offering advisors an alternative to opt-in through the Australian Securities and Investments Commission (ASIC) code approval process.
“Consumers now have more protection with the strengthening of ASIC’s powers to act against unscrupulous operators,” says Ms Mack.
“The passing of FoFA means that the financial advice industry is now on the path to true professionalism.”
Read more on CHOICE’s Future of Financial Advice Campaign at http://www.choice.com.au/media-and-news/consumer-news/news/fofa-passes-parliament.aspx