Bankers call for delay to financial advice reforms

The banking lobby has joined the chorus asking the Federal Government to delay the implementation of its financial advice reforms, which will ban commissions and require financial advisers to ask clients whether they wish to continue receiving their service every two years. 

The Australian Bankers Association (ABA), which represents 15 banks operating in Australia including the big four, argues in its submission to a Parliamentary inquiry that its members need more time to implement changes in the Future of Financial Advice (FOFA) package. 

“We are concerned that the final FOFA legislative package will not likely be passed through Parliament until at least towards the end of the first quarter of 2012, with many obligations due to commence from July 1, 2012,” the ABA said in the statement.

“This means that the financial services industry will have at best only around three months to understand the new regime, determine how it will impact across their businesses, undertake any necessary changes to systems, processes and procedures, and comply with the new law.”

“We consider this is unreasonable and insufficient time for industry to comply with their new obligations.”

The wide-ranging FOFA reforms include the banning of asset-based fees on geared funds, improved licensing and banning powers for the corporate regulator and requiring advisers to act in their clients’ best interest.

They were announced in June 2009, but are yet to fully pass Parliament despite a July 1 starting date. A joint committee of Parliament is still accepting submissions on amendments to the Bill.

The reforms followed the collapse of several high-profile financial services firms Storm Financial and Trio Capital, and are supported by the accounting bodies.

But other groups to call for transitional arrangements include the Association of Financial Advisors and the Financial Services Council.

A spokeswoman for financial services provider IOOF says the body had also called for a delay in the past.

“So we certainly support the bankers’ push,” she says.

“We haven’t seen the full extent of the legislation. It’s very hard to be ready for what we don’t know yet.”

But the industry superfunds body AustralianSuper rejects the idea that more time is needed.

“We note that the financial services industry has been preparing for these reforms for a considerable time,” it says in its submission.

“We do not see it as necessary, nor in the best interests of customers of financial products, for these reforms to be delayed further.”

AustralianSuper also noted that members of the Financial Planning Association and the Financial Services Council will be subject to industry codes that ban commissions on most new products, which is part of the FOFA package, from July 1, regardless of whether or not the law requires it.

When SmartCompany contacted the office of Financial Services Minister Bill Shorten on Monday, a spokesperson said the Minister was “open to considering whether further transitional arrangements are required”.

This followed on from statements made by Shorten in December that a decision on whether or not the reform package will be delayed should come by the end of January.

Peter Johnson, executive director of the Association of Independently Owned Financial Planners, told SmartCompany on Monday that he believed the implementation of the reforms was likely to be delayed and warned that the package would disproportionately hurt smaller financial services providers.