You might have heard the acronym FOFA over the past few weeks and wondered what the fofa it was all about.
For a start, FOFA stands for Future of Financial Advice and was legislated by the previous government to try and improve the standards of the financial sector and protect consumers.
However, ask any financial adviser at the time it was being implemented and you probably would have heard a few other F words used to describe it.
It has proven costly and time intensive to implement and adhere to new compliance regulations.
FOFA has meant many smaller financial advisers needed to find themselves under the wing of a larger company (banks or bank owned companies) to remain viable.
This arguably resulted in less independence in the financial planning industry.
However, the industry has managed to come through the other side and with some benefits from the new legislation.
Those not already doing so have to now act in the best interests of their clients; no longer could they be driven by commissions from products they were pushing.
The new government had been planning to reform FOFA, a move that was being lobbied for by the banks and institutions, while being booed by consumer groups.
But despite the initial frustration, the Financial Planning Association also called on the government to cool itself on parts of the rollback.
This is because the financial planners who’d always been acting on behalf of their clients finally had the chance to disassociate themselves, and their industry, from commission driven salespeople.
As Alan Kohler pointed out, “most financial planners want to be respected professional providers of advice. Banks want them to be salespeople, flogging investment products on commission”.
With the rollback currently paused for further consultation there is now the opportunity for alert consumers to know, regardless of the final outcome, who is actually on their side.
Those in the financial industry who want to put your interests second to theirs have publicly shown their hand.
Don’t forget who they were.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Looking to reach your goals with one of Australia’s highly rated financial advisors?
