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What scrapping the FoFA changes means for you

If you are wondering what the repeal of FOFA (Future of Financial Advice) laws will mean to you read on:

What scrapping the FoFA changes means for you

 

You will need to "opt in" agreements every second year.

If you are paying ongoing fees to your financial adviser you will be required to sign a written consent agreement every two years for you to continue receiving advice and services from your adviser.

The Coalition had scrapped this "opt in" requirement based on reducing additional red tape and costs to advisory service businesses. However industry & not for profit argued it was needed to ensure clients were receiving ongoing contact and advice from their advisers licensees.

Best Interest

Accepting the advice from your adviser will require that your adviser not only ensures their recommendations have considered your needs, circumstances, investing experience and investment personality. Your adviser will also be required to document how this advice is reasonable to your situation.

Conflicted Remuneration

Commissions to licensed advisers have already been banned and this legislation will remain with no new changes to FOFA laws. Adviser Licensees (Dealer Groups) receiving "volume rebates" from banks and wealth managers based on their "dealer groups" sales volumes would discontinue.

Bonus for bank tellers

Banks using "balanced scorecards" for their bank staff as part of their sales revenue and bonus targets by referring customers to bank financial advisers (in the attempt to retain customers by cross selling additional bank products) may need to change their bonus structure for bank staff as critics and the financial sector union believe they encourage a sales culture. Moving forward FOFA rules disallow banks to remunerate their staff this way.

Final Thoughts

While these changes will require additional resources for advisers and licensees to implement and the costs of doing so will be ultimately passed onto the consumer I believe they are a step in the right direction to rebuilding the bridge of trust that is the foundation of the relationship between client and adviser.

Here is a great video to explain why it's so important to seek out a "fiduciary/independent" adviser as apposed to a "broker/vertically integrated" adviser. https://www.youtube.com/watch?v=Dg5RRMAc1GY

Referenced from : Clancy Yeates Article http://www.canberratimes.com.au/business/banking-and-finance/what-scrapping-the-fofa-changes-means-for-you-20141119-11pjsg.html

 
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