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Regulatory backtrack surprises

Tuesday, January 21st 2014, 6:00AM 3 Comments

by Niko Kloeten

Controversial changes to Australia’s financial adviser regulation reforms will be closely watched on this side of the Tasman, the head of a local industry body says.

The Australian financial planning industry is debating proposed amendments to the Future of Financial Advice (FOFA) regime, which were announced by the Coalition government just before Christmas.

Labelled a “watering down” of the FOFA reforms originally passed by the previous Labor government, it is estimated these changes will save the industry A$90 million in implementation costs and A$190 million in compliance costs.

Institute of Financial Advisers president Nigel Tate says he was surprised by some of the changes to the FOFA regime, in particular the weakening of the requirement to act in clients’ best interest. 

“Having to act in the best interest of your client is a key aspect of our regulatory regime in New Zealand,” he says.

However, under the Australian government’s proposal, clients would be able to sign agreements limiting this obligation to specific advice being provided.

The government is also looking to scrap the “opt-in” requirement, which would require advisers to renew contracts with fee-paying clients every two years.

Tate says there is likely to be interest in the changes on this side of the Tasman, partly because of the ongoing goal of closing the regulatory gap between the two countries.

“We’ve been trying to get jurisdictional alignment between the two countries and that will broaden the gap a bit further.”

But Tate expects there to be some vigorous debate in Australia about the amendments to FOFA.

“If it does go through I suspect there would be some opposition to it.”

Sydney Morning Herald personal finance editor John Collett criticised the “neutering” of the FOFA reforms, saying the weakening of the obligation to act in a client’s best interest was the worst aspect.

“The Future of Financial Advice reforms would have helped increase trust. What we have here in the government’s proposed amendments is the interests of the powerful overriding the interests of a disengaged public.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 21 January 2014 at 9:53 am Bill said:
Standard bureaucratic procedure.

The civil servants have to look effective to keep their jobs, so they come up with all sorts of "bright ideas" (you may choose a different description).

Then the cabinet, ever aware of where their votes come from, water it down.

Presto, you have democracy at work.

Inefficient so as always we just muddle along.

Except that the public are, as the article says, mostly "dis-engaged" - I think that means they don't care.

Meanwhile we advisers are told we are needed, but that's not a worry to the civil servants. They will push and pull us this way and that, waste our time and money, as long as they look like they are doing something, they keep their jobs.

Just imagine how well NZ could really do without most of them.

On 23 January 2014 at 9:33 am Amused said:
Well said Bill!
On 24 January 2014 at 12:28 pm billy the broker said:
some good points said there Bill....:{)>

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