The vote was made earlier this week and means financial advisers must fully comply with the original Future of Financial Advice laws.
The FoFA laws are comparable to the UK’s Retail Distribution Review but predate them by around two years having been signed into law in 2011. They came into force in July 2013.
According to local trade publication Financial Standard, from a practical perspective the reversion will mean, advisers must once again conform to the opt-in requirement, which states that advisers must regularly ask their clients to re-sign their contracts. Advisers are also no longer exempt from sending fee disclosure statements to clients who joined them before July 2013. Grandfathering provisions are also scrapped.
The Standard also noted that the other major change is that advisers are now regulated by a ‘catch-all’ provision in section 961(2)(g) of the best interests duty, which adds a very general clause to the six safe harbour definitions of what constitutes ‘best interest’.
In the end, commissions for general advice were left out of the government’s amendments, so there is no change on that front.
The Sydney based publication also said the decision to disallow the amendments, thereby reversing their effects, had been condemned by “many I the industry”.
It quotes the Financial Services Council chief executive John Brogden as saying the disallowance would create a “legal quagmire”, and cost businesses millions of dollars. Furthermore, Financial Planning Association chief executive Mark Rantall said it would have “chaotic effects”.
