The Senate's vote in support of the Government's improvements to our financial advice laws is good news for consumers and for small business financial advisers.
The Senate tonight voted in favour of more affordable, high quality financial advice by removing unnecessary and costly red tape, while maintaining all the important consumer protections that matter for consumers.
Consistent with our commitments before the last election, the statutory requirement for financial advisers to act in the best interest of their clients remains in place, as does the ban on conflicted remuneration.
However, as we promised we would do before the last election, we have
- removed the requirement for an investor to keep re-signing contracts with their advisers on a regular basis (Opt-In);
- simplified and streamlined the additional annual fee disclosure requirements;
- improved the operation of the Best Interest Duty; and
- provided certainty around the provision and availability of scaled advice.
Consistent with our comprehensive statement of 20 June 2014, to provide clarity and certainty for the financial advice industry and investors seeking financial advice, the Government’s changes to FOFA have been implemented through regulations which took effect on 1 July 2014, where that was legally possible.
The Government will continue to progress the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 through the Parliament in an orderly fashion.
The Government appreciates the constructive approach taken by cross-bench Senators in discussions about our financial advice law reforms.
In particular we thank Mr Palmer as the Leader of the Palmer United Party and Palmer United Party senators, the Australian Motoring Enthusiasts Party and Senators David Leyonhjelm and Bob Day for their support for our FOFA improvements.
The Government will implement all of the additional improvements as agreed with the Palmer United Party and the Australian Motoring Enthusiasts Party over the next few months.
We will keep working with all interested parties in the Australian Parliament and all stakeholders in the financial services industry to continue lifting professional, ethical and educational standards for financial advisers.
Our goal as a Government remains to ensure we have a robust but efficient financial services regulatory system, which is competitively neutral so that people saving for their retirement or managing financial risks through life can access high quality advice they can trust and which is also affordable.
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Further improvements to financial advice laws
The Government has agreed to make further improvements to our financial advice laws in regulation and, as required in legislation, to ensure the following requirements in the Corporations Act 2001 are explicitly listed in the Statement of Advice provided by financial advisers to their clients and signed off by both:
- That the adviser is required to act in the best interest of their client and prioritise their client’s interests ahead of their own, consistent with the requirements in subsection 961B and 961J of the Corporations Act 2001;
- That any fees be disclosed and that the adviser will provide a fee disclosure statement annually, if the client enters into, or has entered into, an ongoing fee arrangement after 1 July 2013 (This is already required under our amended financial advice laws);
- That a client has the right to return financial products under a 14-day cooling-off period in accordance with the requirements currently provided under Division 5 of Part 7.9 of the Corporations Act 2001; and
- That the client has the right to change his or her instructions to their adviser, if for example they experience a change in their circumstances.
Any instructions to alter or review instructions must be in writing, signed by the client, and acknowledged by the adviser.
There will be a requirement in those regulations that in that Statement of Advice the financial adviser provides an explicit statement that he or she genuinely believes that the advice provided to the client is in the client’s best interests, given the client’s relevant circumstances.
There will also be a specific requirement enshrined in those regulations that the Statement of Advice is to be signed by both the adviser and the client.
Those changes will be implemented through regulation and, as required, in amendments to the actual legislation currently before the Parliament, the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014.
Finally, the Government will work in consultation with all relevant stakeholders, to establish an enhanced public register of financial advisers (including employee advisers), which includes a record of each adviser’s credentials and status in the industry.