YOURLifeChoices member Bill is considering going to a financial planner, but believes there may be changes afoot. Craig Hall from NICRI clarifies the new rules.
I’ve been told the rules for financial planners are changing on 1 July this year. Can you give me a quick, plain-English summary, without acronyms, I can understand?
A. Changes to the financial planning industry have been announced by the Federal Government over recent years and they are referred to as the Future of Financial Advice Reforms. They include a number of measures with the objective to ‘improve the trust and confidence of Australian retail investors in the financial planning sector’. More specifically, ‘they are designed to tackle conflicts of interest that have threatened the quality of financial advice that has been provided to Australian investors.’
So let’s look at what the measures are –
- The banning of conflicted remuneration arrangements including commissions – planners will not be able to receive payment for recommending or retaining a client in a particular product
- The introduction of a ‘statutory fiduciary duty’ so that financial advisers must act in the best interests of their clients – previously planners had to make recommendations that were ‘appropriate’ but now the recommendations must be in the ‘best interest’ of their clients
- Increased transparency and flexibility of payments for financial advice – to assist consumers to know what they will pay and what services they will receive
- Percentage-based fees will only be charged on ‘ungeared’ products or investment amounts and only if this is agreed to with the retail investor – taking away percentage fees charged on borrowed amounts that are invested
- Expanding the availability of low-cost ‘simple advice’ to improve access to and affordability of financial advice – allow licencees or their authorised representatives to offer low cost ‘scaled down’ advice for non-complex scenarios
- Strengthening the powers of the Australian Securities and Investments Commission to act against unscrupulous operators
- The examination of the need for a statutory compensation scheme for financial services
These reforms are to be introduced on 1 July 2013 and over subsequent financial years. For more detailed information about these measures and implementation visit the Government Future of Advice website
If you require further information on financial matters that may concern senior Australians please contact NICRI toll free on 1800 020110, email [email protected] or write to PO Box 1339, Fyshwick ACT 2609. Our information leaflets are also available on our websites www.nicri.org.au © and //moneymap.nicri.org.au.