Victims plead for financial advice protections not to be cut in 'repeal day'
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Version 0 of 1. Financial counsellors, consumer organisations and lobby groups for the ageing have combined to plead with the Abbott government to reconsider the controversial wind-back of consumer protection laws for financial advisers – part of the “bonfire of the regulations” introduced by the prime minister on Wednesday. Choice, the Council on the Ageing, Financial Counselling Australia, the Superannuation Consumers’ Centre and Consumer Action Law Centre are among groups who have written to Arthur Sinodinos to argue against the proposed wind-back of the former government’s “future of financial advice” (Fofa) reforms. The reforms were legislated as a result of inquiries into the collapse of financial advisers such as Storm Financial and Opes Prime. As Guardian Australia reported on Tuesday victims who together lost billions in the collapse of those financial advice firms are joining the consumer groups, superannuant and seniors associations and industry superannuation funds in attacking the wind-back of some consumer protections. The letter to Sinodinos, delivered before the assistant treasurer stood down following an intensifying parliamentary attack over his pre-parliament position with Australian Water Holdings which has been raised by NSW’s Independent Commission on Corruption, demands the government not rush the changes through parliament. “These reforms followed more than two decades of advocacy and investigations from consumer organisations into conflicts of interest in the financial advice industry. The case for reform is highlighted in the catastrophic effects of major financial advice scandals, and detailed in numerous studies where poor advice is attributed to the presence of commissions and the failure of an adviser to act in their client’s best interests,” the groups wrote. Asked about the changes on Monday, Tony Abbott said the former Labor government’s laws were “a classic case of regulatory overkill” because it was already an “ethical given” that professional advisers would take into account the best interests of their clients. The groups say they understand the government’s aim of reducing costs – ultimately born by consumers – through clearing out unneeded regulation, but say “it is arguable they pay even more for conflicted advice and for services which they no longer value or are even aware of.” “In such cases, we believe the balance needs to be in favour of protecting consumers and their retirement income, rather than protecting the income of financial advisers.” “We urge that the government reconsider its proposed changes to Fofa unless it can be comprehensively demonstrated that the benefits to consumers, in terms of protection and confidence, engagement and savings, outweigh the very real costs of conflicted advice and the payment of fees for advice that is no longer being received. “We are particularly concerned that some changes may be fast-tracked through regulation without the federal parliament having an appropriate opportunity to weigh evidence of the impacts on consumers.” The Coalition’s “repeal day” next Wednesday will include the corporations amendment (streamlining of future of financial advice) bill to implement the changes – once again allowing advisers to earn sales commission and other so-called “conflicted remuneration” from providing general financial advice. It also removes the requirement for financial advisers to tell customers how much they are receiving in commissions every year and give them the chance to opt out of the arrangements every second year. With the legislation certain to be blocked by Labor and the Greens in the existing Senate, which sits until 30 June, and many of the existing requirements set to take effect from July, the government is also planning to rush through regulations to try to implement its wind-back in the meantime. Mark Weir, the co-chair of the Storm Investors Consumer Action group, and one of 120,000 Australians who together have lost more than $6bn since 2006 through the collapse of firms from which they received financial advice, is concerned about the changes. Storm investors have written to the prime minister and other ministers pleading for the retention of the laws, which came about as a direct result of a lengthy parliamentary inquiry into the collapses that cost many of them their life savings. “I am very worried, the bottom line is that these reforms were introduced to protect consumers and they haven’t even been given a chance to work yet ... I am suspicious that the financial industry might be pushing their vested interests here,” Weir told Guardian Australia. “Repeal day” – Wednesday 26 March – comes exactly five years after the federal court placed Storm Financial into liquidation. |