Loopholes may see consumers at mercy of financial advisors
CONSUMERS could still be at the mercy of loopholes surrounding financial advisors acting in the 'best interests" of clients, despite minor changes to proposed financial advice reforms on Friday.
Finance Minister Mathias Cormann on Friday re-opened debate on the government's changes to the financial advice reforms, after a Senate inquiry reported on the changes.
That report, including Coalition senators, highlighted loopholes within the government's reforms, and raised questions on whether the changes went far enough to protect consumers.
While Senator Cormann said there remained consumer protections to ensure advisors acted in the best interests of clients, such laws were in place before a series of financial collapses in recent years.
After he put the changes to Labor's Future of Financial Advice reforms on ice earlier this year, the latest proposed changes will still not ensure a ban on commissions is upheld.
While the latest protections should restrict some commissions and conflicts of interest in advice given to clients, they remain weaker than the previous government's reforms, critics say.
The ISA, representing 5 million Australians with industry superannuation accounts, was one of the major groups warning of potential impacts of the government's changes.
ISA chief executive David Whiteley said the "prudent choice" was for government to abandon the reforms altogether, calling for an outright ban on commissions.
His comments were echoed by consumer group Choice, which since the Senate inquiry reported has contacted all federal politicians calling for them to oppose any reforms.
Chief executive Alan Kirkland said conflicted and poor financial advice has already cost "billions" - alluding to the Storm Financial collapse among others.
"This is why consumer protections were originally needed and exactly why they should not be removed," he said.
"The government claims that it is improving the best interests' obligation when in it is removing a professional duty for advisers.
"Financial advisers should be required to act in a client's best interests - full stop.
"And their advice should not be clouded by any type of financial incentive that reward them based on how much of a particular product they sell."
While the latest changes move closer to what many stakeholders have called for, it will still see the removal of "best interest duty" parts of the laws, on the grounds other laws cover such situations.
Parts of the laws will again need to go through parliament, with regulations attached for more controversial parts able to be disallowed by the Senate.
But the responses from two of the more vocal opponents of the changes shows the latest moves are likely to face continued heated debate in and outside parliament.