COTA Australia is the national policy vehicle of the eight State and Territory Councils on the Ageing (COTA) in NSW, Queensland, Tasmania, South Australia, Victoria, Western Australia, ACT and the Northern Territory.
COTA Australia has a focus on national policy issues from the perspective of older people as citizens and consumers and it seeks to promote, improve and protect the circumstances and wellbeing of older people in Australia. Our submissions always incorporate the views of our members developed through various consultation mechanisms.
COTA was a strong supporter of the FoFA reforms as we believed they offered the potential to ensure financial advice was in the interest of the consumer. Australians have quite low levels of financial literacy and therefore many do not have the knowledge to assess the advice they are getting to ensure it is the best option for them. In the past far too many financial advisors appear to have been looking after their own interest and maximising their commissions and third party payments rather than working in the interest of their consumers.
Many older people have been victims of poor financial advice both through major scandals such as the Storm collapse and perhaps more significantly over time, on a daily basis as they seek advice which they think is in their interest but sometimes is clearly not, and their financial position is not optimized.
As the superannuation system matures older people will be making more complex financial decisions that will directly affect their quality of life in retirement. This is compounded by a more ‘user pays’ environment, for example in aged care, in which choices made can have major financial consequences. Many need assistance with planning for retirement and also with how to maximise their incomes in retirement. Older people indicate to us that they have lost confidence in the financial planning industry and therefore many are not seeking professional advice with these important decisions.
The FOFA package was a compromise between consumer protection and the needs of industry. COTA understands the Government’s desire to reduce unnecessary red tape and compliance costs as this might reduce the costs of getting advice. However we believe the Bill does not adequately address the potential costs and detriment to consumers of the proposed changes.
This submission looks at the three key components of the Bill that have been raised with us by older people:
- the best interest provisions
- the opt in provisions, and
- issues around conflicted remuneration.
