Legislative Council Fifty-Second Parliament, Second Session (52-2) 52 2 Parliament of South Australia Legislative Council published Matters of Interest MATTERS OF INTEREST Financial Advice Reform FINANCIAL ADVICE REFORM The Hon. R.P. WORTLEY Legislative Council The Hon. R.P. WORTLEY (15:21): I rise to draw members' attention to the future financial advice reforms. As I have said before, as parliamentarians we strive to serve the best interests of the community and I believe that a big part of that ethos of service is an obligation to convey important messages to the public. I have done this in regard to a variety of physical and psychological health issues and today I am focusing on another sort of health: financial health. I am here to deliver the message that, regardless of the fact that these reforms spring from the federal jurisdiction via the last parliament, the intentions of the FoFA laws and their benefit to every South Australian right now and into the future should be acknowledged in this place. Making informed choices about money during your working life and into retirement is vital for our financial health, individually and collectively, especially in an environment where superannuation funds now manage trillions of dollars. In fact, according to the Financial Review on 17 August last year, our super industry now represents the world's fourth largest pool of managed funds, and that is not even counting the $5 billion plus held in self-managed super funds. Add to this an ageing population and increasing pressure on the pension system, and we can see why reforms to the financial planning sector I am discussing are of such value. The intention of these laws is to improve the quality of advice consumers receive and to augment consumers' access to affordable financial advice. The FoFA reforms became law on 1 July last year, when the financial industry was given 12 months to transition to the new system. Consequently, compliance with the FoFA laws by financial advisers and financial product advisers became compulsory on 1 July this year. Where formerly advisers could profit from advice given to clients, for example, by receiving incentive payments from financial product providers, as of now a best interest duty requires advisers to act in the best interests of clients and not to compromise advice with their own pecuniary interests. Furthermore, the FoFA laws introduce a ban on monetary and non-monetary benefits that could reasonably be expected to influence advice dispensed by advisers. Advisers are now required to give all clients paying ongoing advice fees an annual statement showing the fees paid and the services received and to seek the consent of such clients to those continued charges every two years. Finally, the FoFA reforms support provision of scaled advice about a specific area of financial need, for example, insurance, or about a finite number of issues. This means that consumers now have access to a low cost advice option that focuses on a specific area or areas and the benefit of these reforms are manifest. Consumers can now trust that the advice they receive is not compromised by the payment of commissions to advisers. Greater transparency with regard to fees means that the advice environment is more competitive because advisers have to compete for clients based on cost. Advisers now are obliged to unambiguously explain initial ongoing product and administration fees to clients. Product fees similarly become more competitive over time because financial product providers can no longer pay advisers to recommend their products. The scaled advice gives consumers greater access to low cost advice. These laws now in place encourage all Australians to obtain financial advice and support consumers' confidence and trust in that advice. On that point, the reforms will shake out those financial advisers who have lined their pockets with the hard earned life savings of people whose trust they have abused. That is a real win for the community. I commend these laws and the enhanced financial benefits that they provide our people whatever their stage of life because, to return to my theme, I contend that financial health (or its obverse) can have a pretty significant impact on our physical and psychological health, both immediately and in the long term.