Restoring trust in the financial planning industry
The last few years have seen the public trust in the financial planning sector plummet, following major collapses like Storm Financial, Opes Prime, Trio Capital and others. The Government thinks financial planning is important, which is why we are reforming the sector to remove conflicts of interest and restore trust in the profession.
With around 1 in 5 Australians currently receiving advice, the public policy and industry challenge is to ensure more Australians have access to high quality and affordable advice, particularly as we enjoy the gift of longer life. There is little doubt that those who access quality financial advice are better off than those who do not.
In recognition of this, the FOFA reforms focus on improving the quality of financial advice and expanding the availability of more affordable forms of advice. The removal of regulatory barriers to the provision of different forms of advice will open up new markets for financial planners, helping them reach younger customers and those with less complex advice needs.
The key reforms include a ban on conflicted remuneration structures, including commissions and volume payments, a requirement for advisers to obtain client agreement to ongoing advice fees every two years and the expansion of limited advice.
I am optimistic these reforms will genuinely enhance the confidence that consumers have in financial advice and reinforce the move towards the professionalism advocated by industry bodies such as the Financial Planning Association. Put simply, they ensure the practices of the leading advice firms become the industry and consumer standard.
These reforms will see Australian investors receive advice that is in their best interests, rather than being directed to products as a result of incentives or commissions offered to an adviser.
Details about the Government’s Future of Financial Advice reforms can be found here.
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