Claims that financial services will become more expensive as a result of the motion to disallow amendments to the FoFA laws do not stand up to scrutiny, according to Industry Super Australia.
“In the wake of this week’s Senate vote to disallow government regulations to water down protections, there have been a number of misleading and unsubstantiated claims made that Australian’s will now have to pay more for financial advice,” said David Whiteley, chief executive of Industry Super Australia.
Last week, the successful disallowance of the Federal Government’s amendments to wind-back the original Labor Government’s FoFA reforms was slammed as having the potential to significantly harm the financial services industry and its consumers.
David Hasib, a partner at Chan & Naylor wealth planning group, said that rejecting the reform amendments would strangle competition and make advice too costly for consumers.
“Should the previously proposed reforms go ahead on 1 July next year then this will make providing financial advice extremely expensive for the consumers, which ultimately will force ordinary Australians to opt for the more affordable but vertically integrated, and ultimately conflicted, advice channel,” he said.
However, Whiteley says that if passed, the amendments would have actually caused consumers to fork out more money to pay for financial advice – not the other way around.
“The research, commissioned by ISA, calculated that the direct cost to consumers of watering down the FoFA laws would have added up to more than $530 million a year in increased fees and charges from the reintroduction of commissions and other conflicted payments.”
The report shows the removal of the opt-in would have been profoundly damaging, with consumers paying an extra $1.7 billion for advice not received over a 14 year period. In addition, the availability of ongoing asset-based fees would have rediced delivery of scaled advice leading to an additional $1.9 billion in extra fees, bringing the cumulative total for the removal of the opt-in to $3.6 billion over 14 years.