COTA Australia still fears for the future of an independent, professional financial advice industry in Australia after the Federal Government indicated it will proceed with most of its legislation to water down consumer protections provided by the Future of Financial Advice (FOFA) legislation passed by the last parliament.
This follows the Minister for Finance’s announcements today and the release of the Senate Economics Legislation Committee report on Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, tabled on 16 June in which the official but minority report by Coalition Senators essentially endorsed the legislation proceeding with only minor cosmetic changes.
This is despite legal advice and overwhelming evidence from all consumer organisations, including COTA Australia, National Seniors, CHOICE and others, opposing any watering down of the FoFA legislation passed last year, which was itself a compromise providing less than gold standard protections.
Whilst acknowledging and welcoming that the government has gone some of the way in dealing with
commissions COTA Australia CE Ian Yates said COTA members are frustrated and bemused by the Government’s persistence in seeking to:
(a) allow financial advisors to provide “scaled” advice that may be in their interest but not consumers’ interest;
(b) removing the key catch all protection against providers acting in their interest rather than their client;
(c) allow the banks to financially reward their staff for selling financial products to unsuspecting consumers without proper advice; and
(d) allowing poor quality advisors to get out of keeping up to date with clients situations and ensure clients know what they are paying for.
“To be very clear, COTA is not siding with any special interests in this debate and resents any such suggestion – we are acting on strong legal advice about the impact of these reforms and deep concern expressed by members,and we would oppose the FoFA changes whether proposed by the government or Labor”, Mr Yates said.
“The Big Four Banks and their push-selling business model will be one of the major winners if the legislation is watered down – at the cost of their customers being vulnerable to less than optimum financial outcomes”
“Other winners will be financial advisors who like to play the rules to their advantage and not follow the spirit of legislation and are still a long way removed from a culture of consumer best interest .
“COTA will be advising older Australians to be very cautious of the financial advice they receive from banks and financial advisers if this legislation goes through – people will not be able to be assured that their best interests are always being put first.
“Retirees simply can’t afford bad or conflicted financial advice. They have no opportunity to recoup lost
investments or assets and they need the best possible advice to maximize their retirement income.
Media contact: Ian Yates 0418 835 439, Jane Garcia 0434 489 533