The Australian Government announced their response to the Parliamentary Joint Committee on Corporations and Financial Services' Inquiry into financial products and services in Australia, otherwise known as the Ripoll inquiry, on 26 April 2010.
The aim of these reforms, know as the Future of Financial Advice is to tackle conflicts of interest within the financial planning industry in an effort to restore the confidence and trust of retail investors following the fallout of Storm Financial, Opes Prime and Westpoint.
Removal of the accountants' exemption
As part of the FoFA reforms, the government announced that the existing exemption permitting accountants to provide advice on the establishment and closure of a self-managed superannuation fund (SMSF) without holding an Australian financial services licence would be removed. However, the government will consult on an appropriate replacement.
SMSF advice – removal of the accountants' exemption
Other elements of FoFA
Other elements of the FoFA reforms which will impact financial planners include:
- the introduction of a statutory best interests duty
- a ban on up-front and trailing commissions for investment products
- a ban on commissions on group life insurance products for all superannuation products
- a ban on commissions on all life insurance policies in a default or MySuper product
- a comprehensive ban on volume payments
- a prospective ban on soft dollar benefits over $300 excluding continuing professional devleopment and administrative information technology services where set criteria are met
- a prospective requirement for clients to opt-in to receive ongoing advice
All reforms will be prospective and apply from 1 July 2012, with the exception of the ban on commissions on all life insurance policies in default or MySuper products, which applies from 1 July 2013.
Consultation process
As part of the consultation process, a Peak Consultation Group was established. The role of this group has been to work through some of the key implementation issues. CPA Australia is a member of this group, with other members including representatives from industry, other professional associations, academia, consumer representatives, and the Australian Securities and Investments Commission.
The government has also established a Financial Advice Advisory Panel to review the professional standards of the financial advice industry, including conduct and competency standards. The panel will explore the possibility of a new code of ethics for financial planners. CPA Australia CEO, Alex Malley, is a member of the panel representing the professional accounting bodies.
CPA Australia has been heavily engaged in the consultation process on our members' behalf and will continue to seek member input throughout the consultation process.