National consumer law firm Slater and Gordon today welcomed the move by cross bench senators last night to block the Government’s watered down Future of Financial Advice (FOFA) reforms saying it was a win for common sense and for consumers.
Slater and Gordon consumer advocate and professional negligence lawyer Ben Whitwell said the FOFA amendments were introduced as a result of a clearly identified need that Australian consumers be protected and their best interests looked after.
“For too long the financial advice industry has been allowed to operate unchecked with mum and dad investors – including those with self-managed super funds planning for retirement– being taken advantage of.
“The FOFA reforms were introduced to protect every day investors and essentially require the industry to take a long hard look at itself.
“The attempt by the Coalition Government to wind back these reforms was risible and a ludicrous policy risk that would have left consumers exposed.
Mr Whitwell said the industry had seen more than 10 years of collapses which left everyday Australians devastated.
“HIH, ACR, Westpoint, FinCorp, BridgeCorp, Storm Financial, Trio, Great Southern and LM all provided attractive commissions to advisors who in turn recommend those products where, more often than not, the investments were not suitable for their clients.
“Their collapses all left mum and dad investors and retirees financially crippled because their financial advisors failed to act in the best interest of their clients.
“The best interest duty provision in FOFA means the financial adviser must act in the best interests of the client and prevents them from purely recommending those investments from which they get the biggest commissions.
Mr Whitwell said it was ludicrous the changes intended to wind back the requirement for fee disclosure statements.
“Consumers have a right to know what advice they are seeking will cost and any additional costs associated with that, on an ongoing basis”, he said.
Mr Whitwell said today’s announcement by ASIC that it has launched action in the Federal court against the LM directors - in which thousands of Australians lost money due to bad financial advice - is a clear demonstration of why we need strong consumer protection.