Networth News

Welcome to the Networth News update for Tuesday the 30th of August.

Financial planners weigh in on opt-in

Associations representing the financial planning community came out against the two-year opt-in proposal contained in the Government’s draft Future of Financial Advice (FOFA) legislation. Money Management reports that both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) expressed concerns over opt-in, however, the FPA welcomed the fact that under the draft legislation new clients would be the test for the opt-in trigger and penalties for future potential opt-in breaches had been reduced. However, the AFA said the draft legislation failed two important tests with respect to access and transparency with its acceptance of a two-year opt-in based on research commissioned by the Industry Super Network.

More powers to ASIC under FoFA

ASIC will be given wider enforcement powers under its draft Future of Financial Advice (FoFA) legislation to ban financial planners and refuse licenses where it might be suspected that they could break the law or not comply with their professional obligations. Investor Daily reports that in the 10 years since the introduction of the Financial Services Reform Act, ASIC has never been able to refuse a licence based on the test that a person may contravene the obligations in future. However, under the draft legislation, the government said it wanted to ensure that ASIC can more appropriately account for the likelihood or probability of a future contravention.

Opt-in costing ridiculed

Industry players have widely criticised the government's assertion that opt-in will cost just $11 per client under its Future of Financial Advice (FoFA) draft legislation. Investor Daily reports that the government cited research from Rice Warner which estimated the cost of opt-in to be about $11 per client. However financial service provider Synchron claimed the figure of $11 per client is "absolute nonsense" and estimated the likely cost to be between $75 and $100. A recent Investment Trends survey of financial planners found that it could cost up to $250 per client to administer opt-in.

Group life insurance to suffer under commissions ban

The government has been criticised for its decision to ban commissions across all group life insurance products offered within superannuation under its draft Future of Financial Advice (FoFA) legislation. The Financial Review reports that specialist group insurance advice would likely decrease as a result and The Corporate Super Specialist Alliance said advisers in the group life insurance industry would struggle to find alternative means of remuneration. Under the draft FoFA legislation, financial advisers will only be allowed to receive commission on individual life insurance policies within super for DIY super funds and choice products.