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FOFA bills pass Parliament Late FOFA By Mike Taylor THE Government’s Future of Financial Advice (FOFA) bills have passed the House of Representatives with the support of the key independents and on the back of crucial changes to the original opt-in arrangements regarded as favouring the Financial Planning Association (FPA). After nearly four days of controversy surrounding the leaking of a document purported to be an agreement on FOFA struck between the FPA and the Industry Super Network (ISN), the Minister for Financial Services and Superannuation, Bill Shorten, announced key amendments largely confirming the contents of that document. Standing to conclude the d e b a t e a r o u n d t h e F O FA bills, Shorten announced “t h e G ov e r n m e n t w i l l b e moving an amendment that offers financial advisers an alternative to the opt-in requirement”. “ This amendment will allow ASIC to provide class
would introduce legislation into Parliament by 1 July 2013 that would enshrine the term ‘financial planner or adviser’ in law. Shorten indicated that the Independents, particularly Rob Oakeshott, had been critical to the development of the amendments. Other minor amendments were achieved by the Opposition, including making the annual fee disclosure requirements more workable by excluding prospective fee forecasts. After a number of days during which organisations such as the Association of Financial Advisers (AFA) and the Financial Ser vices Council (FSC) had expressed concern about the striking of “side deals” and the involvement of the ISN as an apparent intermediary, the FPA emerged as a major beneficiary of the legislation ultimately passed by the House of Representatives. The terms of the amendments mean that the FPA – with its existing and wellacknowledged code of
Rob Oakeshott order relief from the opt-in requirement to licensees and representatives who are signator ies to an ASICapproved professional code of conduct by 1 July 2015,” he said. “Importantly, such an ASIC-approved code would need to include practices and conduct requirements that obviate the need for the optin requirement. This amendment ensures that the opt-in requirement is linked in legislation to the class order relief for licensees and representatives,” Oakeshott said. As well, he said that under the proposal the Government
conduct and its approach to standards of professionalism in the industr y – is best placed to deliver on the framework outlined by Shorten. What is more, the FPA has been the most steadfast proponent of enshrining the term ‘financial planner’ in law. It was a measure of the attitude of other groups that F S C c h i e f e x e c u t i v e Jo h n Brogden said the Government had walked away from the centrepiece of its reforms by dropping the requirement for advisers to adhere to the opt-in reform. “Our concern is that the legislation leaves it to ASIC to administer opt-in without any certainty as to what they require to provide an exemption and what the professional standards will be,” he said. “Under a last minute deal between the FPA and ISN, the Government has dropped the requirement for opt-in but will not give any certainty to consumers and advisers on the operation of the best interest duty and scalable advice,” Brogden said.
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Sentiment Index
39
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While there is a slight improvement in confidence, sentiment remains low and could easily slip back depending upon news from Europe and the U.S.
McMahon said this explained why many planners continued to lean to conservative settings such as cash. On the question of underlying business conditions, planners indicated they were in somewhat better shape in February than they were last Decem-
By Tim Stewart
ber. Asked whether, in their role as a financial planner, times were good or bad right now, there was a significant increase in the number of respondents reporting that times were good.
Figure 1 Wealth Insights Financial Planner Sentiment Index Wealth Insights Financial Planner Sentiment Index
ASX All Ordinaries Index
FINANCIAL planner and client sentiment improved marginally in February b u t re m a i n s v e r y f ra g i l e a m i d t h e expectation of bad news, according to the latest research conducted by Wealth Insights. The research, contained within the Wealth Insights Financial Planner Se n t i m e n t In d e x , s a w s e n t i m e n t recover from the lows recorded in December and January to a level not seen since around August last year. However, the February 2012 sentiment index was at minus 66 points – we l l b e l ow t h e p o s i t i v e 2 0 p o i n t s recorded in February last year. Wealth Insights managing director Vanessa McMahon warned that the recovery in sentiment was fragile and could easily slip back, depending on the tenor of news out of Europe or the US. “Planners are braced for bad news, they just don’t know what it will be,” she said.
delay costs instos WHILE the industry has welcomed the delayed implementation of the FOFA reforms, the eleventh hour nature of the decision has cost the big institutions money. The Government announced on 14 March 2012 that the ‘hard’ i mp l e m e n t a t i o n d a te fo r t h e changes would be delayed for one year to 1 July 2013. A N Z g e n e r a l m a n a g e r fo r advice and distribution Paul Barrett warned in early December that Christmas was the deadline fo r h i s o r g a n i s a t i o n t o s t a r t making changes to its systems in preparation for a 1 July 2012 start date. “It has cost us money. For a number of weeks during and after Christmas we started coding systems and anticipating where things would end up,” said Barrett. “Most of our guesses were right, so it didn’t end up costing us a whole lot in the end – but it had the potential to,” he added. IOOF general manager for distribution Renato Mota said there had been a significant cost for IOOF, a n d t h a t i t c o u l d h ave b e e n avoided if the Government had announced the delayed implementation date before Christmas. “A lot of the systems development has really occurred in the last three months. It certainly has made a major impact – we’ve had people punching away at computers, putting code in and developing the back end of the business,” Mota said. H oweve r, h e a d d e d t h a t t h e industry would be better off now that the implementation dates for MySuper, SuperStream and FOFA are all scheduled for 1 July 2013. Colonial First State (CFS) gene r a l m a n a g e r fo r p ro d u c t a n d channel development Peter Chun said “it would have been a bit of a mad scramble” to have everything FOFA-compliant by 1 July 2012. The biggest challenge for CFS was trying to make changes to systems and processes based on draft
Planners remain cautious
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Vol.26 No.11 | March 29, 2012 | $6.95 INC GST
Source: Wealth Insights