President Barack Obama has expressed interest in adopting a FOFA style best interest duty for US financial advisers.
Following several instances of misconduct within the finance
industry, the best interest duty was introduced by the previous Labor Government in 2012 in a bid to improve trust, promote transparency and confidence in the financial service sector.
However, the FOFA amendments have been a great source of frustration for financial advisers who have watched the proposed changes stagnate only to have the Coalition’s ‘watered down’ changes rejected in Parliament in
President Obama proposes that US financial advisers would be forced to abide by a strict set of regulations; including a more stringent fiduciary standard. The current US system allows for
retirement accounts to be only suitable for clients; which allows brokers to be able to coerce clients into investments that incur higher fees and may not be the best option for the client. President Obama said that Americans, “should have peace of knowing that the advice they are receiving for investing those dollars is sound…that you’re not been taken advantage of.”
The intended FOFA style reforms have received a mixed response in the US with financial
planners, and Wall Street Stockbrokers expressing their concern that the proposed changes will add further red tape, complexity and costs. Dale Brown, President of the Financial Service
Institute said that he was concerned that, financial advisers will not be able to provide services to “Main Street Investors.” Brown warning that, if the FOFA style regulations are implemented,”they could slice fees brokers receive from mutual funds for selling their
retirement plans to clients.”