25 June 2015
Media Release - #2015033, 2015

In the role of: Assistant Treasurer [23 December 2014 - 21 September 2015]

Finalising the Future of Financial Advice laws

The Government has agreed with the Opposition to progress minor and technical refinements to the Future of Financial Advice (FOFA) laws contained in the Corporations Act 2001.

FOFA was introduced in 2012 following a bipartisan parliamentary inquiry. The laws provide important consumer protections by imposing a statutory best interests duty on financial advisers, banning conflicted remuneration, and strengthening disclosure.

The agreed refinements will improve the operation of FOFA, and alleviate a number of unintended consequences, most of which have arisen since the laws were legislated.

The agreed refinements will be progressed through a new regulation, before 1 July 2015, to:

  • 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 Government is also 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.

Once these refinements are finalised, FOFA should be considered settled and given time to work.