FOFA drafts strike balance: govt

Assistant Treasurer Arthur Sinodinos.

31-Jan-2014

By Kate Kachor

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Draft changes to Labor’s advice reforms would not result in a watering down of consumer protection, but struck a balance between reform and the removal of unnecessary red tape, the Assistant Treasurer said yesterday.

Arthur Sinodinos on Wednesday released the federal government’s draft legislation and regulations in regards to its amendments to the Future of Financial Advice (FOFA) reforms.

Sinodinos last night admitted the government had been given a “bit of a shellacking” over the draft amendments.

Certain sections of the industry, including financial advisers, had shown support for the moves, while other sectors had suggested the changes would water down consumer protection, he said.

He said he did not agree with the naysayers.

“I don't believe we are [watering down consumer protection],” he told the Value Alliance new year reception in Sydney.

“In doing what we're doing, we were seeking to strike a balance - retain the essences of FOFA and the protections which has been built in, while getting rid of unnecessary red tape and also to remove the provisions which we thought might actually inhibit the provision of lower-cost affordable financial advice.

“The last thing we wanted was another situation where we were raising the costs of actually providing advice and making it harder for Australians to get advice.”

One of his aspirations as Assistant Treasurer was to make sure as many Australians as possible got access to “affordable, good advice”, he said.

“If you look at the stats on this, there are too many Australians making financial decisions for themselves in an ill-informed way - and that's even people who think they know what they are doing,” he said.

“Believe me, until you get someone sitting down with you and actually going through things with you, provoking the right sorts of questions, I don't know that you're going to come to the right decision.”

He used the example of the government's planned changes to the best interest duty as an example.

“So when we looked at something like the best interest duty, where there were six steps to help you define how you meet that test and you’re putting the interest of the client before your own, there was that catch-all, gee, number seven, which we felt, based on the feedback we had from industry, was creating too much uncertainty and potentially undercutting the whole process of meeting the other six,” he said.

“And you can’t have a situation where people become so risk averse in giving advice that you’re not appropriately balancing the risk and returns to your client.

“So we needed to make sure there was a robustness to the advice.”

In response to criticism that the government’s decision to make some of its FOFA changes regulatory changes rather than all legislative changes was “a way to get around parliament”, he said it was not.

“They will have scrutiny, but what we are doing is some stuff by regulation so we can get it out there as quickly as possible and get on with it, because my remit from the Treasurer Joe Hockey and the PM Tony Abbott, is that in my area, in all our areas, we get on with our election commitments,” he said.

“I have a real commitment and passion about the role of financial services as an industry, because I think it’s one of the areas in which Australia has comparative advantage.

“It’s one of the great success stories of the last 30 years.”

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