Finance Finance News Cormann defends FoFA reforms despite freeze

Cormann defends FoFA reforms despite freeze

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The finance minister is standing by the Federal Government’s proposed changes to financial advice rules despite yesterday putting a key aspect of the plan on hold.

Yesterday, Mathias Cormann confirmed the Government had frozen plans to change Labor’s financial advice rules through regulation.

Senator Cormann says he wants to consult stakeholders in “good faith” but the Government is determined to pass related legislation.

The Coalition’s planned changes would remove a catch-all clause stipulating financial advisers must act in the best interests of their client.

The clause is one of seven “best interest” tests in Labor’s rules, the other six would remain.

Speaking to AM, Senator Cormann defended the Coalition’s push to let banks and financial advisers pay incentives to low-ranking staff for giving general product advice.

And he denies that such advice is conflicted.

“If somebody goes into a Holden dealership to ask for some advice about a Holden product, you wouldn’t expect the Holden employee to do anything other than provide advice on the Holden product,” Senator Cormann said.

Industry Super Australia chief executive David Whiteley, who does not back the changes, welcomed the delay.

“It would probably be a better move to extend the freeze for another two or three years,” Mr Whiteley said.

The Financial Services Council, which represents wealth managers, says the break will help the Government better communicate the changes.

Chief executive John Brogden supports the move and says he will use it to lobby for a better outcome.

“There was frankly a lot of hysteria about what people thought was in that legislation,” Mr Brogden said.

Seniors consumer group the Council on the Ageing (COTA) also welcomes the decision, with chief executive Ian Yates saying he hopes to discuss whether the plan is good for older Australians.

The Government is taking submissions on the changes.