Back flip could save retirement

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A reversal of the changes to the Future of Financial Advice (FoFA) legislation which was introduced on 1 July 2014, passed through the senate last night after several senators backed away from the agreement previously struck with the Abbott Government. Senators Jacqui Lambie of the Palmer United Party (PUP) and Ricky Muir of the Motoring Enthusiasts Party added their support to Labor senator Sam Dastyari’s move to have the changes revoked. On Tuesday, Senator Dastyari had also managed to secure the votes of all Greens senators and those of independents John Madigan and Nick Xenophon, giving Labor the votes it needed to undo the recent deal struck between Clive Palmer (on behalf of PUP) and Finance Minister, Mathias Cormann.

The disallowance motion removes all the changes which enabled the watering down of consumer protection laws in relation to financial advice.

Senator Dastyari said of the move that it was a “coalition of common sense”. “We’ve put together a group of senators who’ve said ‘Enough’s enough, there have been too many victims of financial crime and the last thing we should be doing is watering down protections for consumers,” he said. “These regulations by Mathias Cormann were returning us to the bad old days of financial planning where a handful of crooks, criminals and conmen dominated the industry.”

While senators Lambie and Muir were denounced by Clive Palmer for changing their minds after amendments to the legislation requested by them had been implemented, Jacquie Lambie stood firm. “I have to do what’s right by my conscience and I believe we’ve allowed it to be watered down – and that’s the issue I have with it, I’ve had that issue all along with it,” she said.

“The first couple of weeks of being up in the Senate were very difficult, we were all trying to find our waywell, I’ve found my way now. You know what, sometimes when you make a wrong (sic) you have to go back in there and make it right, and that’s exactly what I’m doing now, ” Senator Lambie responded.

Senator Corrmann called on senators Lambie and Muir to honour the agreement and said that disallowing the changes would be bad for small business financial advisors and their clients.

Read more at SMH.com.au

Opinion: A win for retirees

Who knows what really prompted the back flip by senators Lambie and Muir to support the disallowance of changes to FoFA, and frankly, who cares? Common sense has prevailed.

However, what has probably been just as damaging as the removal of consumer protection laws in the FoFA debacle, is the sheer confusion it has caused for those who desperately need to seek financial advice. Quite honestly, the average consumer can be forgiven for not knowing where they stand with financial advisers. So, should the vote indeed pass the Senate and the changes are disallowed, what will this mean for you?

In simple terms, consumers will notice the following:

  • Financial advisers will have a clear obligation to act in a client’s best interests at all times.
  • Conflict payments, such as wholesale bonuses to financial planning dealer groups based on their sales will be banned, meaning clients should expect to receive unconflicted advice.
  • Any fees, be they upfront or trailing commission, will have to be disclosed regularly, with advisers being required to contact clients at least every two years to ensure they are happy to keep paying fees.
  • The Australian securities and Investments Commission (ASIC) has noted the disallowance and stated that it will “take a practical and measured approach to administering the law” and work in a facilitative manner with financial services licensees until 1 July 2015 – i.e. it will allow planners time to get their act together in the wake of the reversal of legislation.

When reviewing this list, it’s difficult to see what all the fuss was about, as these measures are, in plain terms, no-brainers. However, the reinstatement of such protection measures will hurt the big four banks and AMP financially, so it’s no surprise that this is where most of the government’s support is garnered.

Financial planning scandals are never far from the headlines and we can only hope that the increased commentary surrounding, and awareness of, financial planning regulations will make such scandals a thing of the past.

Do you think that the disallowance of the changes will actually help consumers? Do these changes make you feel more confident about seeking financial advice? Or do you think that the whole financial planning industry has been tainted by scandal?

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Written by Debbie McTaggart

73 Comments

Total Comments: 73
  1. 0
    0

    What sort of advice do retirees on the Centrelink age pension need? For example, do the Centrelink aged pensioners need to be told not to smoke, drink alcohol or play poker machines? None of us can “turn the clock back” and rectify our past mistakes, financial or otherwise. Certainly people seeking advise in financial matters would be wise to get “quotes” from different sources as you would from tradesmen doing work around your home. Did the Labor government, in passing the original legislation, think we are all so dumb as to need reminding to approach investment advice with care?
    In dealing either with banks or load sharks, we should look at the advisors and wonder to ourselves, “What’s in it for them?” It is always better to ask what may seem to be “dumb questions” instead of allowing ourselves to be rushed into dumb mistakes.

    • 0
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      Got it in one, wally.Oh and, people, just watch the ad for Australian super to see where your money goes :-).

    • 0
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      No matter what the vultures, sorry Financial Advisers, get their stipend, even if we are losing money they claim theirs. Those associated with banks are no better than freelancers. When a FA claims he can secure you a certain income or insurance rate they should be required by law to forego their fee and make up any shortfall in their promised return on investment. If this were so there would be a lot of very poor FAs and retirees and investors with more money. Give the lot of them the boot and even if you only achieve bank interest rates it is better than losing the lot.

    • 0
      0

      Wally: You may have the intellect to look after yourself, but so many others haven’t.

      If Joe Hockey’s mother can lose her invested money to the unscrupulous CBA investment adviser (the Asian fellow that was still getting away with ripping off people until recent weeks and so far I believe has not been punished for his crimes) surely anybody can be caught in the web of deceipt from some of these investment advisers. Apparently this legislation by Mathias Cormann and the Coalition to the Labor government’s tightening provisions was idiotic. All Cormann can say now is it will be bad for small business, the investment advisers and their clients! I don’t think he is too concerned about the clients, i.e. the ones losing their hard-earned savings. Its all about “big business” as usual and Cormann’s idea of taking away some protection laws from the client is just making life easier for the investment adviser. Let the bleeders work a bit harder and fill in some paper-work and earn the atrocious moneys they receive in commissions etc. The Cormann Law apparently will stand for the time being, but will revert to the previous Labor legislation some time next year. And so it should. The more protection the general public receives from shonky investment advisers, real estate agents, etc. etc. the better.

    • 0
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      Wally: The law is not just for the protection of pensioners on Centrelink payments.
      I doubt Joe Hockey’s mother would be one?

    • 0
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      Well said MITZY. Who is looking out for the older people who can,t understand the gobblygook.

    • 0
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      “What sort of advice do retirees on the Centrelink age pension need?”

      Probably none,just as many other people don’t either. But this is about those who DO need advice.

    • 0
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      Mitzy,
      It does not take much intellect to walk into a bank and ask an Interest Rate!
      You are right I have looked after many peoples finances,not for a bank or investment society and never received a cent in commission or fees. Each of those people or organisations ended up with more than they started, none lost a cent and I still maintain my total honesty. No I am not a saint nor a sinner just a person who has helped people less fortunate than me and without want or need of a reward.
      If Joe Hockey’s mother lost her money as you say, it was not through her lack of understanding etc, just the greed for more than a fair return. Little fish are sweet to eat and the bones do not choke if the fish is eaten slowly. (Old dougie proverb.)

    • 0
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      Come off the grass wally. We are talking about retirees predominantly who lost their life savings. Not because these people chose an investment option but rather because they were either sold a dud which the salesman made a good commission on or were put into certain product against their advice. This is where the CBA got caught out.
      Your liberal party support is a disgrace wally. i thought that you had more ethics than to protect the big banks playing a crooked hand rather than people who have worked a lifetime and just want a reasonable return so that they can pay their bills.
      Your attack on Labor is the normal dishonest approach. For anybody reading this post it needs to be understood that Labor brought in reforms in the wake of a number of planning industry failures where the large players responsible walked away after ruining the last year of many an Australian. The current disreputable government has tried to wind back these protections introduced by Labor…..because this government is controlled by big business.
      Tell the truth wally. Not the fairy tale you go on with.

    • 0
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      “what sort of information do retirees on the Centrelink age pension need?”

      I would suggest there are a great many who are only on a very minimal aged pension and have quite a lot of money invested or wish to invest but want to make sure they can still access a part pension and its associated concessions.

      This is where financial advisors come into the picture.

  2. 0
    0

    This is a great win for all Australians. I worked in the back offices in administrative roles of the Life Insurance Industry from 1971 to 1991…..and the “excesses of unionised capitalism” that was lavished on the Salespeople & their Mangers et al was grossly immoral – eg up to 110% & even higher in some cases – of the 1st years premium paid on a Life Policy went straight into the wallet of the Salesperson. In those days the “Painter’s & Docker’s Union” were considered corrupt – bl**dy hell, they wouldn’t hold a candle to what was going on in the Life Insurance Industry. Those practices have been curbed over time, but the current day “Financial Planners” as they have “re-badged themselves still have among their number a lot of shonky people, whose sole aim is to sell a “financial product” that earns them the greatest amount of commission & also bonuses + possible annual off-shore 5 star “Conferences”…….so in a sense “I care” and am glad that another Conservative supporting lobby group have not been “let off the leash” to revert to those ways of doing what is best for them…..and bugger the punter!!!

  3. 0
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    Any government that attempts to remove ‘safety measures and regulation’ that are designed to protect those that are most vulnerable in society,(of which the government has custodial care), is clearly unsuited to it’s position. If society was epitomised as a child we would remove ‘the child’ for it’s own welfare and protection. In this case ‘removing the child’ is impractical, so we need to remove the ‘irresponsible and negligent parent’, this government!

    • 0
      0

      This government is a disgrace after breaking every promise it made before the last election. Since then it has attacked average Australians relentlessly whilst being the administrative arm of its benefactors: big business.
      What it tried on with FOFA should come as no surprise.
      Abbott and his cronies will be gone in a year and not many average Australians will shed a tear.

  4. 0
    0

    Wally, while there is some merit in your comment, you appear to be ignorant of the guile that is used by the unscrupulous to ‘beguile, confuse and rip off, even those that make every attempt to gain the information you appear to believe is readily available. Now you may be a person of superior intellect and be able to avoid the traps and snares of the unscrupulous, but there have been many such people (responsible owners of businesses also) who have lost everything due to ‘lack of regulation.

    • 0
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      bartpcb

      Your post touches on some valid points but, in my opinion, omitted the most fundamental characteristic in any discussion of such matters………..and that is GREED!

      It is inherent in all of us to some degree but it is only when you allow it to gain ascendancy over caution, common sense and the multitude of so-called “bad luck” stories, that you are in trouble.

      It is part of the human condition to believe that one’s action will result in, at least, no harm and potentially a good outcome so, given this, many otherwise sensible people are vulnerable to the spiel of some smooth tongued “advisor”.

    • 0
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      Spot on Paddles. And then there is the cover up and having the power to walk away and leave the victims destitute.

  5. 0
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    It needed to be overruled as the ACCC is as useless as you know what on a bull.
    There are many good hard working people who have been ripped off and had no recourse.
    This should not be allowed to happen in what most people deem a civilised and fair society.
    it seem’s corruption rules in many forms. Not all the people who have had there life savings taken by unscrupulous companies are unintelligent just caught up in the speel. and we get that in all forms of life don’t we

  6. 0
    0

    bartbcp, absolutely agree with you. My husband lost a third of his super in 2007 whilst he was battling terminal cancer, because of indifference by the financial advisor. He was too sick to deal with it and passed away not knowing how bad things had gone. I picked up the pieces , dealt with the reduction in income and found a safer investment for what was left. It can be a minefield out there particularly for women whose husbands managed the financial side of things. I’m glad to hear there is a watchdog in parliament.

    • 0
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      Whilst I am not unsympathetic to your plight Mar, I cannot understand how a ‘watchdog in Parliament’ would have (or will in future) prevented your situation. You say the advisor was ‘indifferent’. How would the watchdog prevent that? The watchdog will not be checking everyone’s financial affairs on a regular basis. Can you imagine the outcry if they did?

      The real lesson in your story is that financial matters should not and must not be left to one person in the relationship. Both partners must understand their financial situation so that in the event of a major event such as the death of one of them, the other is not left without resources. And this is true what ever age you are.

    • 0
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      KSS

      How refreshing it is to hear a (your) voice of reason on this site.

    • 0
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      KSS: the whole point is that the new legislation puts the onus on the provider of advice. Bad advice can then lead to an easier prosecution where the the more powerful party (the banks) do not have a leg to stand on if they messed up.

  7. 0
    0

    I’m right got no money to invest barley manage to live day to day on the Aged Pension, worked hard for more than 60 years but the bloody governments made sure I was kicked down then kicked again.

    • 0
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      Simo

      If you were granted your time over again, would you have made any different decisions.

      If “Yes”, then how much of the blame will you take for your current situation or are you one of those who seek to blame the Govt for every goddamn thing that is wrong in life?

  8. 0
    0

    Yes these financial advisor people need some regulation where is little care and no responsibility, so good for the independents who looked after us old folks.
    In 2000 I forked out for a professional financial plan but it was virtually useless so been on my own ever since. There will be no assistance coming my way from Government and doing OK, but if this legislation helps some retiree from getting fleeced, that will be a great outcome.

  9. 0
    0

    The fact that this Liberal Party would even consider scrapping consumer protection like this is proof of how corrupt they are.
    Now the Parliament has decided to stop their games is indeed a blow for common sense.
    DEMOCRACY IN ACTION!!!!!

    People tend to forget that the government is the whole parliament, not just the party with the most members. If a decision is passed by a majority of MP’s, like this one has, then it has been democratically passed, whether the bloody Liberal Party agrees with it or not.

    Anyhow, back on the subject of Financial Planners and their trustworthyness (or lack of).
    Without these laws, they are salesmen, interested only in their own prosperity, and we are the prey.
    With these laws, the are forced show an interest in us and our prosperity if they are to prosper.

    Just remember, it is a “collar and tie” industry, which means “I tell lies for a living”.
    NEVER TRUST A PERSON WEARING A TIE

    • 0
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      Hawkeye, they are still ‘salesmen’ they just have to tell you they are salesmen and who they are selling for at what price. You still have to make your own decisions about whether to accept their product or not. That is a responsibility that always was and remains with the purchaser.

    • 0
      0

      Hawkeye, you say, “the government is the whole parliament, not just the party with the most members.”

      This is incorrect. The government IS the party with the most members in the H of R ( or teh party which can have a majority with support of other parties/independents as per the last Labor government).

    • 0
      0

      Hawkeye, your statement is not based on fact. What consumer protection was about to be scrapped??? Please explain??? Please tell me you are not just repeating the lies you have heard from labor and the greens?

    • 0
      0

      Frank, did you not read the opening article by Debbie. She calls it “watering down” and I call it “scrapping”. Same outcome.

      Rod63, You are wrong my friend. The current situation of allocating the titles of Government and Opposition are merely what the system has degenerated into at the hands of our two party system and their vested interests. We are actually supposed to be governed by the Parliament, with the Upper House representing the states, reviewing their decisions to keep them in check.
      What happens to your idea of government when EVERYBODY comes to their senses and all vote for independents.

    • 0
      0

      You are such a blatant troll Frank. You know full well that Abbott and his cronies watered down the protections put in place by Labor. The reason for this was to protect their banking mates.
      If you want details then google it rather than play the devil’s advocate.

    • 0
      0

      So mick you don’t know either? If you want to talk about protecting banking mates, then explain how Storm and the CBA managed to destroy people’s lives under the noses of ASIC with the ALP and their coalition of common sense too busy fighting with each other to notice the carnage.

    • 0
      0

      ASIC is a toothless tiger which needs to be restructured so that the army of do nothing pen pushers is replaced with people do the job.
      Your continued scapegoating of Labor avoids the point that BOTH SIDES ignore things like like the Storm and CBA until the media forces them to act. You are good at unfair accusations….but that is how political trolls work.

  10. 0
    0

    I heard that Lambie was sent back to the paddock. The pup got tired of trying to round her up.
    Anyway hope it’s not a back flip with an inward pike and incorporating a double twist.


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