Government’s Future of Financial Advice Reforms Paper

     Office of the Hon Chris Bowen MP
         Minister for Human Services
Minister for Financial Services, Superannuation
               and Corporate Law



To access the Government’s Future of Financial Advice reforms paper. Click on the below link

Message from the Minister

The Government recognises the important role played by financial advisers1 in assisting people to
plan for their future. Longer term challenges such as the ageing of the population, as well as
recent events such as the global financial crisis, underscore the need for quality advice.
It gives me great pleasure to announce significant reforms to the provision of financial advice,
which I believe will improve the quality of advice, strengthen investor protection and underpin trust
and confidence in the financial planning industry. These reforms should ultimately encourage
more people to seek financial advice.
This package represents a comprehensive Government response to the recent Inquiry into
Financial Products and Services in Australia by the Parliamentary Joint Committee on
Corporations and Financial Services (the PJC Inquiry, see Attachment A), which was set up in the
wake of collapses such as Storm Financial and Opes Prime.
In this respect, the Government’s response is guided by two overriding principles:
• financial advice must be in the client’s best interests – distortions to remuneration, which
misalign the best interests of the client and the adviser, should be minimised; and
• in minimising these distortions, financial advice should not be put out of reach of those who
would benefit from it.
The Future of Financial Advice contains three key reforms, which will apply from 1 July 2012:
• A prospective ban on conflicted remuneration structures, including commissions and any
form of volume based payment. In addition, percentage-based fees (know as assets under
management fees) can only be charged on ungeared products or investment amounts.
• The introduction of a statutory fiduciary duty for financial advisers requiring them to act in the
best interests of their clients and to place the interests of their clients ahead of their own
when providing personal advice to retail clients.
• The introduction of adviser charging regime, which retains a range of flexible options for
which consumers can pay for advice and includes a requirement for retail clients to agree to
the fees and to annually renew (by opting in) to an adviser’s continued services.
The reforms also significantly expand the provision of low-cost simple advice (known as intra-fund
advice) to areas including transition to retirement and the nomination of beneficiaries. There will
be a review of whether other measures are needed to clarify whether simple advice can be
provided in a compliant matter outside intra-fund advice.
I welcome the significant efforts of industry, including the Investment and Financial Services
Association (IFSA) and the Financial Planning Association (FPA) to remove commissions. The
reforms clearly support their efforts by introducing enhanced standards that apply across the retail
financial services industry. The reforms will greatly reduce the incidence of investors being
recommended financial products as a result of sales incentives offered to advisers. Clearly, clients
should receive advice that is in their best interests.

Chris Bowen

Minister for Human Services, Minister for Financial Services, Superannuation and Corporate Law

1 The reference to the term ‘financial adviser’ in this Information Pack generally refers to those who provide ‘financial
product advice’ under the Corporations Act 2001.