The government has temporarily put on hold its highly controversial dilution of consumer protections in the financial advice laws while it consults with stakeholders.
The announcement by Finance Minister Mathias Cormann comes after he took carriage of the changes to Labor’s Future of Financial Advice (FoFA) law following Arthur Sinodinos standing aside last week as assistant treasurer because he has been called before the Independent Commission Against Corruption as a witness.
The proposed weakening of consumer protections has been widely attacked, with representatives of retiree groups particularly concerned and set to lobby politicians in Canberra this week. The Financial Planning Association, representing a large section of the industry, has been critical of the return of commissions.
The government plans to water down the requirement under which advisers must act in clients’ best interest; scrap the “opt-in” provision that advisers every two years must get clients to agree to continue to receive their service; limit the annual disclosure measure so it applies just to post-July 1, 2013 clients; and apply the ban on “conflicted renumeration” only to the provision of personal advice - exempting general advice.
Cormann today reiterated that the government remained committed to “implement the improvements to FoFA which we took to the last election, as soon as possible.” But he said: “I have decided to pause the process on the FoFA regulation for the time being to enable me to consult on good faith with all relevant stakeholders before pressing the go button on our changes.”
Opposition leader Bill Shorten said it was “not enough to put the policy into a deep freeze - the Prime Minister should dump these changes just like he’s dumped its champion Arthur Sinodinos”.
While the government promised the changes before the election, the return of commissions was not part of its pre-election policy. The banks strongly lobbied Sinodinos to allow commissions.
Matthew Rowe, chairman of the Financial Planning Association, today welcomed Cormann taking carriage of the FoFA changes, saying the association had a strong working relationship with him in the past when he oversaw the area in opposition.
Rowe said the FPA supported the intent of the government’s plans for FoFA and the majority of its proposed reforms. “But we want absolute clarity that there will be no commissions provided on giving general advice,” he said.
Shadow Treasurer Chris Bowen accused the government of a botched process, saying “I just don’t think the government realised the fire they were playing with here”.
He warned that if this was just a “stunt” to get through the Western Australian Senate election on April 5 Labor would not stand for it.
The government has legislation before parliament for the changes but also had intended to introduce them by regulation this week. Labor had committed to trying to disallow them.
Cormann wrote in today’s Australian Financial Review that there had been a lot of “misinformation” about the government’s planned improvements to the financial advice laws and their impact on people seeking advice for their retirement.
“Some of it has been deliberate and mischievous, while some of it reflects a genuine lack of understanding of what is proposed. It has, however, created a level of unnecessary concern and confusion for those who believe everything that has been written, especially those saving for their retirement.”