The federal government survived the embarrassment of its financial advice regulations being struck down in the Senate after it gained the support of the Palmer United party in a last-minute deal on Tuesday.

As part of the deal the finance minister, Mathias Cormann, wrote to Palmer to outline a number of changes that would be made to the financial advice laws. While some groups believe the changes are positive, others have condemned the agreement, saying it would do little to protect consumers from a system that has been weakened by the federal government’s regulations.



Guardian Australia asked a range of organisations involved in the financial advice industry three questions: what is their view on the financial advice regulations that have taken effect? What impact will the proposed modification to the regulations in Cormann’s letter have for financial advisers and consumers? And are they concerned about any of the flagged changes?



We received a range of responses. A number of organisations did not reply, including AMP, ANZ Bank, the Commonwealth Bank, NAB and the Financial Services Council. Here are the ones that did.



David Whiteley chief executive, Industry Super Australia

What is Industry Super Australia’s view on the financial advice regulations that have taken effect?

I think that consumers need to be very wary when meeting a financial adviser. They need to be aware the adviser receives sales incentives, they need to be aware the advice may not be in their best interest, and if they want to proceed with advice they need to insist that they pay an upfront fee. Consumers should never agree to ongoing fees deducted from their superannuation to advisers.

What impact will the proposed modification or additions to the regulations have for financial advisers and consumers?

Without seeing the detailed regulations I am relying on minister Cormann’s letter. According to the letter three of the four amendments are already consistent with existing law and for the fourth it is of course possible for a client to contact their advisers should they have concerns about their investments.

Are you concerned about the proposals outlined in the finance minister’s letter?

The short answer is we are deeply concerned that these amendments add no additional consumer protection. The reality is consumers have lost ironclad protections; the reality is that banks will now be paying sales incentives to their financial advisers while masquerading as being impartial advisers.

We do recognise that the Palmer United party is concerned about consumer protection. Our concern is that these amendments do not achieve the objectives that they have sought. What I would say is that when you look at public opinion and when you consider the direction of the Murray review, it is quite clear that yesterday’s reduction in consumer protections will only be a temporary measure. This reduction in consumer protections is not consistent with the long-term trajectory for the community’s demand for impartial financial advice.

Westpac/BT Finance Group spokeswoman

What is Westpac/BT’s view on the financial advice regulations that have taken effect?

We have always supported sensible changes to the Fofa laws to allow more Australians to access financial advice. These reforms do just that, providing more certainty to our customers along with a renewed emphasis on transparency and professional standards within the wider industry.

What impact will the proposed modification or additions to the regulations have for financial advisers and consumers?

The regulations affirmed by the parliament ensure that Australia will have one of the most robust financial advice regulatory regimes in the world. Personal advice will be subject to a best interest duty and clients will be provided with increased transparency about the services they are receiving and the fees they are paying. Just as importantly, the regulations will allow for the provision of better targeted and more affordable advice, allowing thousands more Australians to receive quality financial advice. At the same time, consumers can be confident that wide-ranging prohibitions on conflicted remuneration will apply to ensure that personal financial advice is provided in their best interests.

Are you concerned about the proposals outlined in the finance minister’s letter?

While we will need to see the final regulations, in principle we support these changes on the basis they will provide greater transparency, making it clearer to clients that we are acting in their best interests.

Importantly, we also strongly support the government’s commitment to develop a register of financial advisers as another measure to increase transparency for consumers. It is an initiative we have been pursuing for some time.



Michael O’Neill, National Seniors chief executive

What is National Seniors’ view on the financial advice regulations that have taken effect?

They've wound back consumer protection. They've provided for a reduction in protection for consumers. That’s based not on my view but on legal advice that we've taken that there are significant adverse effects on consumers.

What impact will the proposed modification or additions to the regulations have for financial advisers and consumers?

It's obviously only happened very recently. We've taken some very early soundings from our lawyers, and they've indicated that the amendments are duplicative of what's already there, and provide no additional consumer protection. In particular, they fail on the best interest duty.

Are you concerned about the proposals outlined in the finance minister’s letter?

The current state of affairs is very disturbing, particularly when the timing of the announcement of these changes coincides with the comments from the chairman of the financial services inquiry, David Murray, that there's a significant issue with financial advice. It's extraordinary to see that on the same day as protections are wound back for consumers.

Association of Financial Advisers spokesman

What is the AFA’s view on the financial advice regulations that have taken effect?

We supported the package of regulations that the minister had put in place from 1 July.

What impact will the proposed modification or additions to the regulations have for financial advisers and consumers?

A number of them are already obligations but by putting them in the statement of the advice and getting the advisers to talk it through with the client, that’s a healthy process to go through. The adviser and the client need to sign off on those things as well. It probably won’t change greatly the process, but it will change the message that’s delivered and the clarity of the message. That’s positive, and if it just reinforces the message around the requirement to act in the client’s best interest, then it’s a positive step.

There’s another point in there which is around the creation of a register that includes all advisers and we also strongly agree with that. It would be a very helpful step so there’s a single register and we have clear visibility over who is able to give financial advice.



Are you concerned about the proposals outlined in the finance minister’s letter?

We don’t have any particular concern. It will just take a little bit of time to get that ready, but these are absolutely achievable changes.

Ian Yates, chief executive Council on the Ageing

What is the Cota’s view on the financial advice regulations that have taken effect?

Essentially the so-called catch-all or general provision regarding best interest has been removed. What that means is that best interest is now defined as a checklist of other items. That’s not just our advice, it's also the advice that came from independent legal advice. The second is that while classical conflicted remuneration is outlawed, people can be remunerated by volume.

What impact will the proposed modification or additions to the regulations have for financial advisers and consumers?

The first one on Palmer’s list says that they will have to provide a statement that’s in your best interest. What that ignores is that it’s not a colloquial term, it has a specific meaning which has just been weakened.

Are you concerned about the proposals outlined in the finance minister’s letter?

The other matters Cormann identified are essentially in the law now. The register is a good idea, and could probably start being developed anyway. But all we would have then is a register of advisers that didn’t have the same obligations as they had in the original Fofa.