Putting ‘big business’ before consumers
Older Australians are warning the federal government’s decision to unwind consumer protections will undermine trust in financial advisers and banks, and erode the Coalition’s support base.
Federal Finance Minister, Mathias Cormann, has announced the government will proceed with plans to scrap key consumer protections embedded in financial advice reforms implemented in the wake of the Storm and Opes Prime collapses.
Michael O’Neill, National Seniors chief executive, claimed the federal government had clearly put “big business ahead of consumers”.
“This refusal to budge will undermine trust in financial advisers and strike at the heart of the Coalition’s support base,” Mr O’Neill said.
“As the system grows increasingly complex Australians are forced to seek professional help. Instead they’re finding themselves either weighed down by hidden fees or, on the back of shoddy, commission driven advice, destitute in retirement.”
According to Mr O’Neill, Australians should not be paying commissions for advice they do not receive; every investor should see full fee disclosures annually.
“We all should know that the nice lady at the bank is being well rewarded for that product she’s just encouraged us to buy,” he said.
Minister Cormann’s Future of Financial Advice amendments will:
- remove the catch all aspect of the duty to put the client’s interests first and, in doing so, provide a safe harbour for advisers against investors claiming for their losses;
- remove the requirement for fee disclosure statements to be sent to pre 1 July 2013 clients, denying already committed investors levels of transparency afforded to others; and
- allow for the provision of ‘scaled advice’ which will circumvent the ‘best interests’ duty requirement and allow advisers to push a particular product without considering the consumer’s overall position.
Treasury says the amendments will save business $190 million a year, but external modelling shows they will cost consumers $533 million a year.
Independent legal analysis commissioned by National Seniors concludes the amendments represent a major detriment to consumers.
A 2012 ASIC shadow shopping survey showed: only 3% of that retirement financial advice was of good quality; 58% was adequate; and almost 40% was poor. Yet, more than 80% of people believed they had received good quality advice and 78% had paid fees based on a percentage of their assets or investments under advice.
