Assistant Treasurer Arthur Sinodinos has bowed to industry pressure and is proposing changes that will make it easier for advisers to receive commissions for selling a wide range of investment products.
Sinodinos is currently consulting the industry on draft rules, and once agreement has been reached the changes will apply to the FOFA reforms.
Major banks and wealth managers are responding hastily to what finance experts have called a watering down of investor protection laws. Reportedly both the National Australia Bank-owned wealth manager plans to introduce a new annual dealer facilitation fee of up to 0.5 per cent of clients’ assets under management and the CBA’s CommInsure division is offering $985 scholarships to advisers to attend a conference in Toronto.
Previously under the FoFA reforms volume-based sales payments and so called soft-dollar incentives such as overseas trips were to be banned, however a Sinodinos spokesperson confided under the proposed changes products sold in accordance with general advice (advice given without a review of the client’s financial affairs), will not be subject to the ban on conflicted remuneration. The Government spokesperson also said that, “the current ban on conflicted remuneration, has resulted in significant compliance costs for industry and was less likely to cause a detriment to the client because general advice was unlikely to influence a person’s investments decisions.”
While the major banks have responded enthusiastically to the proposed changes critics claim that the Government have gutted and softened the laws that were intended to boost transparency, protect investors and improve access to advice.
Bernie Ripoll, opposition spokesman for financial services accused the government of, “slowing down the process of building a professional financial services sector and going down the cheap popular path of least resistance rather than doing the hard yards and lifting standards.”
David Whiteley, chief executive of Industry Super Australia also attacked the Government’s changes by suggesting that, “it goes way beyond tidying up, or tweaking some regulations…this is about wide-ranging changes that go to the very heart of the proposed reforms.”