FOFA, otherwise known as “The Future of Financial Advice”, is legislation that was originally introduced by the federal Labor government in July 2012 to provide consumers with protection from deficient financial advice. The legislation became mandatory on 1 July 2013. After industry consuktation amendments were proposed and these have recently passed through parliament in the form of the Corporations Amendment (Financial Advice Measures) Bill.
According to the government, the amendments will improve the advice provided to consumers and alleviate the unintended consequences that have arisen since the original FOFA laws were introduced.
“The Coalition Government is committed to providing certainty and reducing complexity for business and financial advisers, whilst maintaining the quality of advice for consumers who access financial advice,” said Minister for Small Business and Assistant Treasurer, the Hon Kelly O’Dwyer MP.
“The time for advisers to provide renewal opt-in notices and fee disclosure statements to retail clients will be extended from 30 to 60 days after the clients’ renewal notice day. After the Bill is enacted, advisers will have this additional time to properly prepare and assure the quality of these documents and for consumers to make a considered decision.”
The Bill also includes a number of other elements to improve the operation of FOFA. In particular, the Bill:
- treats basic insurance products and non-cash payments (such as travel money cards) consistently with other simple financial products;
- clarifies the application of the client-pays and intra-fund advice provisions to ensure they operate as intended; and
- broadens the existing ‘education and training’ provision to include education and training that relates to the carrying on of a financial services business, allowing education and training on a broader range of topics to be provided.
“The legislation also introduces a limited regulation-making power to allow the Government to wind back existing exemptions to conflicted remuneration to address any future unintended consequences in relation to the conflicted remuneration provisions,” Minister O’Dwyer said. “The Turnbull Government will continue to implement initiatives from the Financial System Inquiry in order to enhance the financial system and ensure Australians continue to have confidence that our financial system is the best in the world.
“We are in the final stages of developing legislation to establish a new framework to improve the standards of professional financial advisers. We have also introduced legislation to regulate the payment of life insurance commissions in order to address concerns about the quality of life insurance advice that was being provided to clients.”