Rhetoric and unnecessary scare mongering are clouding the facts about proposed amendments to the best interest duty component of the Future of Financial Advice (FoFA) legislation, says the Financial Planning Association of Australia (FPA).

FPA CEO Mark Rantall said Australian consumers have nothing to fear from proposed changes to remove sub-s 961(B)(2)(g) of the Corporations Act. He said “we are witnessing an extraordinary effort by product providers and those who represent them to build a political position – based on flimsy arguments – in defence of a redundant section of FoFA pertaining to the best interests duty”. Mr Rantall said consumers had nothing to fear from the proposed amendments. He said the best interests duty obligations are for the first time a statutory obligation in law. This was not the case before FoFA and this duty will remain long after any amendments made by the Government, he said.

[Section 961B requires financial planners to act in the best interests of their clients. It provides 7 safe harbour steps, one of which is para (g) which has been described as a “catch-all requirement” as it requires a provider of advice to have “taken any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client’s relevant circumstances.” Despite the proposed removal of this catch-all requirement, a provider will still need to satisfy each of the other steps in s 961B(2)(a) – (f) to satisfy the best interests duty.]

The FPA says the removal of para (g) does not in any way remove or diminish the legal obligation for a financial planner to “act in the Best Interests of their Clients” as required in Div 2 of Pt 7.7A of the Corporations Act.

Source: FPA media release, 11 February 2014

[LTN 28, 12/2/14]