The Government has released a statement that agreement has been reached with the Opposition to progress ‘minor and technical’ refinements to the Future of Financial Advice laws (FOFA laws).
The refinements are designed to improve how FOFA laws operate and eliminate a number of ‘unintended consequences’ of the laws.
The agreed refinements are to be introduced by regulation before 1 July 2015. Based on the Assistant Treasurer’s media release, the intended purpose of these changes are as follows:
- 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 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 media release also refers to Government consultation on additional changes to the FOFA laws which are intended to be introduced in the second half of the year. This will include proposed changes to allow future governments to specify in regulations that ‘certain benefits’ amount to conflicted remuneration.
The agreed refinements and proposed refinements are designed to finalise the FOFA laws so there is certainty in the industry. Whether this will be the outcome will be subject to the detail of the agreed refinements and the future proposed changes. We will continue to follow these changes and will update the blog once the detail of the agreed refinements is released.
To read the Assistant Treasurer’s media release, click here