AFA hopes Government is listening to FOFA criticism

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6 February 2012

The Association of Financial Advisers (AFA) hopes the Federal Government will look at the evidence given to the Parliamentary Joint Committee hearings on the Future of Financial Advice (FOFA) bills to improve them.

AFA CEO Richard Klipin says hopefully the evidence will help to put FOFA back on track.

“The AFA commends the rigour and transparency of the process and thanks the committee for the opportunity to shine the light on the real facts and impacts of FOFA,” he said.

“We trust the Government will use the evidence given to the committee to amend FOFA so that the draft legislation can actually achieve these objectives.”

The AFA believes parts of FOFA are good while other parts aren’t.

“A best interests duty that is workable makes sense,” Mr Klipin said. “So does removing conflicted remuneration when it skews advice outcomes.”

But the AFA believes opt-in, annual fee disclose, a ban on life insurance commissions inside superannuation and the introduction of legislation favouring intra-fund advice over holistic advice will price ordinary consumers out of the market.

“We believe that the introduction of these measures, notably opt-in, will impose unnecessarily onerous obligations on the advice industry, hampering their ability to provide timely and effective advice and adding significant costs,” he said.

“These costs will have to be passed on to consumers, ultimately pricing many out of advice.”

Mr Klipin says if the proposed FOFA reforms go ahead without amendment, 35,000 people across the financial advice profession will lose their jobs.

“If we accept the evidence, supplied by the Government in the explanatory memorandum attached to tranche one, then 6800 adviser roles will be wiped out,” he said.

“Extrapolate that number out to include the five or six ancillary staff each small business adviser currently employs and you’re looking at about 35,000 jobs.”

Mr Klipin argues the AFA is in a good position to know how many jobs are at risk because it represents small business advisers.

“The Government has not yet done the modelling work we have repeatedly called for and therefore cannot supply any evidence to the contrary,” he said.