Further Submission to Inquiry into Streamlining of Future of Financial Advice Bill 2014

New Submission

We put in a submission to the Committee when the Bill was first considered and appeared at one of the public hearings. Many of the provisions of this Bill were in the previous Bill and our position on them has not changed.

We are disappointed that the negotiations with the Palmer United Party and the Australian Motoring Enthusiasts Party has led to a Bill that significantly reduces consumer protections and does not address some of the fundamental concerns raised by many of the submissions to the previous Committee inquiry and reflected in the dissenting reports.

The additional amendments all address the Statement of Advice as outlined in the Explanatory
Memorandum for the Bill i.e.:

  • provide for additional disclosure and information in the Statement of Advice in relation to existing rights of the client and obligations of the provider of advice;
  • ensure that any instructions for further or varied advice from the client are: documented in writing; signed by the client; and acknowledged by the providing entity, or an individual acting on behalf of the providing entity; and
  • require that the Statement of Advice be signed by both the provider of the advice and the client.

In principle COTA has no objection to these amendments as they attempt to provide some additional safeguards for consumers.

However these amendments are deceptive for consumers because to obtain the government's support for them PUP had to agree to vote for removal of the fundamental consumer protections in the original FOFA legislation (even though these were a compromise). So these amendments would have had value if built on solid stone foundations, they are now severely diminished because they are built on the shifting sands resulting from removal of the catch all best interest protection and the allowance of conflicted remuneration and unprotected scaled advice.

We also have the following specific concern with the amendments around seeking further or varied advice. We support the provision in to require a written and signed copy of further or varied advice as this gives the consumer more control. However it seems to be significantly undermined by the provision outlined in 4.14 of the explanatory memorandum which states "the fact that the client does not sign a written copy of the instructions for that further or varied advice is not evidence that the instructions have not been given." We think many consumers would find this contradicts the intent and weakens the protection it might otherwise give them. This is not transparent and is likely to cause confusion.

 Download COTA's Further Submission to Inquiry into Streamlining of Future of Financial Advice Bill 2014

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