There is a debate emerging around proposed windbacks of consumer protections in the financial advice industry, in particular the Future of Financial Advice (FoFA) reforms introduced in 2012. These reforms were introduced in light of a series of financial advice scandals as well as global reform in the wake of the GFC.
They introduced important protections ensuring that advice was only given in the interests of the client, not influenced by an adviser receiving commissions for recommending certain products. The reforms also prevented consumers of financial advice from being charged ongoing fees for a service they didn’t receive.
In any discussion about diluting these consumer protections it is important that we don’t forget the facts. Research conducted by Rice Warner highlighted how comprehensive the benefits of the FoFA reforms are and will continue to be to consumers and to the industry.
Rice Warner’s research forecasts that:
- The reforms will boost Australians’ private savings under advice by $144 billion by 2027.
- The average cost of advice will reduce from $2,046 before the reforms to $1,163 after the reforms by 2026/27 (in 2012 dollars).
- The provision of financial advice to Australians will double – by 2026 there will be 1.88 million pieces of advice provided compared to 893,000 pieces under a no reform scenario.
- A cost benefit analysis finds that over 15 years, the benefits of reform outweigh the costs even on the most conservative assumptions.
Any measures which have the potential to undermine consumer protections, increase the cost and diminish the quality of advice, and ultimately harm superannuation savings will not be supported by ISA.