Everyone has had their say about the contentious laws to protect us from the problems which bedevil the financial planning industry.
The super funds, the politicians, the industry bodies, the pundits argue to and fro about the merits and dangers of the Future of Financial Advice (FoFA) regulations.
Perhaps it’s due to the complexity of the issues at hand, such as what’s known as ‘conflicted remuneration’, or our general disengagement from our financial futures.
But now it’s time to hear from the very people whom all sides of the debate claim to represent but until now have been largely silent – the consumer.
Put simply, the consumer interest is about correcting, so far as is possible, the massive imbalances of power and information which typify the market for financial advice.
It shouldn’t be so hard. The real push for FoFA began life after the collapse of Storm Financial some five years go when rogue financial planners took plump commissions to guide the unwary into ruinous investment vehicles.
it’s time to hear from the very people whom all sides of the debate claim to represent but until now have been largely silent – the consumer
The story goes back some 20 years to concerns about how the emerging financial planning industry was infected by the self-serving sales culture of the life insurance salespeople who largely created it.
CHOICE magazine featured a cover as sadly relevant then as it is now; a marionette in a suit representing a planner with the cover line question, ‘Who is pulling his strings?’
The very core of paid-for advice of any kind is that it should be independent, open and expert and with no strings attached. But about 80 per cent of planners are owned by the big banks and insurance companies and tend to sell their products.
If consumers understood better what was at stake with the government’s rushed plans to dismember the FoFA protections by regulation, and so avoid further debate, I believe they would be justifiably outraged.
The laws are a considered package of measures to level the yawning gap between the consumer, who is an amateur in such matters, and the planner, who is very much full-time if not professional.
There’s been a parliamentary inquiry, rigorous consultation, horse trading and considerable dilution of the original intent of the laws to get them through parliament only last year.
Now with precious little real debate the assistant treasurer Arthur Sinodinos claims he has a mandate as a result of the 2013 election to hang, draw and quarter FoFA (my description).
In essence, three key principles are for the chopping block – which, when stripped of their technical complexities, seem perfectly reasonable.
First and most glaringly is the best interests duty, which says it’s a legal requirement for the planner who you are paying to put your interests first. Hardly revolutionary, you might think, but for the cries it will ruin the industry.
Second is the ban of those conflicted remunerations, usually commissions, but also arguably percentage-based fees on the funds under management. Commissions can corrupt and many planners have abandoned them, but under the changes bank staff said to give general and not specific advice can hop back on the gravy train.
Third are the opt–in provisions, which mean every two years the consumer must be informed as to what financial product they have and how much it’s costing them and must elect to carry on.
Again, hardly a great onus for many businesses who pride themselves on the transparency with which they conduct their trade.
In matters financial, however, it’s well known that too much of the wealth management industry trades on consumer inertia and disengagement, meaning we don’t keep as alert of what we have and what we are paying as we should.
… too much of the wealth management industry trades on consumer inertia and disengagement
To explain what FoFA stands for we have started a consumer-led campaign to let ordinary people know what is at stake and amplify their voices and actions to defend the protections.
Already www.saveourfofa.com.au has attracted a considerable following among those determined to have their say and not let the debate just be dominated by those with a vested interest.
We intend to mirror the intense lobbying effort on government from those who have sought to emasculate FoFA for their own interests.
We might not have the funds at their disposal but ‘people power’ can have its own might and after all what we are talking about is our money not theirs.
Christopher Zinn is an independent consumer advocate running the people power campaign www.saveourfofa.com.au
While director of campaigns at CHOICE he was involved in the FoFA debates and consultations.