Industry braces for FOFA shake-up

Having secured 81 House of Representatives seats – with a projected 89 at the time of writing – the federal Coalition will form government following assent from the Governor General, with Tony Abbott to be made prime minister.

Should the Coalition make good on its pre-election promises, there will be a number of implications for financial services practitioners.

In particular, the Coalition’s pre-election national productivity policy – outlined in the Policy to Boost Productivity and Reduce Regulation document – the Coalition pledged to make amendments to the Future of Financial Advice (FOFA) regulations.

Specifically, the Coalition has pledged to implement the 16 recommendations it made as part of the Parliamentary Joint Committee inquiry into FOFA, including the complete removal of opt-in, as well as “simplifying and streamlining” annual fee disclosure requirements while “improving” the best interest duty and providing certainty around the provision and availability of scaled advice.

The ban on risk commissions inside super will also be refined, the document stated.

More broadly, the Coalition has committed a general moratorium on further regulation of the financial advice profession, as well as cutting red tape for “small business financial advisers”.

“According to the Insurance Council of Australia, the Labor Government’s FOFA package will cost an estimated $700 million to implement and impose a $375 million compliance burden on the financial services industry each year,” the policy document stated.

“The Coalition will amend the legislation to reduce compliance costs for small business financial advisers and consumers who access financial advice.”

Industry representatives have welcomed the move, with Association of Financial Advisers chief executive Brad Fox issuing a statement within minutes of the concession and victory speeches.

“The AFA has a mandate to work with Government to achieve outcomes that support advisers and advice businesses in the important role they play helping to build, manage and protect the wealth of everyday Australians,” Mr Fox said.

“The AFA is supportive of the changes to the FoFA reforms as announced by Senator Mathias Cormann and the Coalition prior to the election and will work closely with the new Government as these changes are implemented.”

Financial Planning Association general manager, policy and conduct, Dante De Gori also welcomed the new government, tweeting a personal congratulation to Senator Mathias Cormann, tipped to be the next financial services minister.

“I look forward to working with you and your team in Government,” Mr De Gori wrote.