Amendments to the Future of Financial Advice (FOFA) laws, which came into effect on 1 July 2015, are aimed at improving the operation of the FOFA laws and alleviating a number of unintended consequences which have largely arisen since the introduction of the FOFA laws. The Assistant Treasurer has also foreshadowed a number of further refinements to be legislated in the second half of 2015 and indicated that once these further refinements are legislated, FOFA should be considered finalised.
In summary, the refinements in the Corporations Amendment (Financial Advice) Regulation 2015 (Regulation):
- clarify that advice provided to an employer about default superannuation funds is considered to be providing a financial service to a retail client;
- make FOFA consistent with other parts of the Corporations Act 2001 (Cth) by including a wholesale and retail client distinction;
- update FOFA to treat non-cash payments, such as travel money cards, consistently with other simple financial products;
- ensure that the modified best interests duty applies in respect of advice on basic banking products and/or general insurance even where provided at the same time as advice on the provision of consumer credit insurance (which attracts the full best interests duty);
- make the conflicted remuneration exemption that applies to basic banking products and general insurance applicable to benefits relating to consumer credit insurance where an employee or agent of an authorised deposit-taking institution provides advice on any or a combination of these three products; and
- ensure that benefits provided by a retail client to their financial adviser are exempt from conflicted remuneration provisions.
The Government has also announced that it is consulting on further refinements to be progressed by legislation in the second half of the year to:
- ensure the existing ‘mixed benefits’ and ‘intra-fund advice’ provisions operate as intended;
- ensure that future governments can specify in regulations that certain benefits are caught by the ban on conflicted remuneration; and
- extend and align the periods of time that an adviser has to send an opt-in renewal notice and a fee disclosure statement to their client to 60 days, to facilitate adviser compliance.
See media release dated 25 June 2015.