The Council on the Ageing (COTA) has announced that the future of the Australian financial advice industry is in jeopardy following changes to consumer protections.
This comes following the federal government's announcement that it will proceed with planned legislation changes, ones that will water down consumer protections provided by the Future of Financial Advice (FOFA) legislation.
FOFA was designed to primarily improve the trust and confidence of Australian retail investors, by focusing on improving the availability of high quality financial advice. Changes in December 2013 were set to reduce compliance costs as well as the regulatory burden on the financial services sector.
Consumer organisations opposed the watering down of the FOFA legislation, which COTA says was already a compromise that provided 'less than gold standard protections.'
COTA Australian CEO Ian Yates explained that COTA members are disappointed with the government's plans, including allowing financial advisors to offer scaled advice in their best interest. In addition, they also criticised the removal of the catch-all system designed to prevent providers acting in their own best interests, as opposed to those of clients.
"Winners will be financial advisors who like to play the rules to their advantage and not follow the spirit of legislation and are still a long way removed from a culture of consumer best interest," Mr Yates explained.
A strong financial advice network is key to the aged care industry, and will only become more essential as the sector continues to grow. It's important that an emphasis is placed on supporting the Australian elderly population as they enter aged care facilities.
"COTA will be advising older Australians to be very cautious of the financial advice they receive from banks and financial advisers if this legislation goes through – people will not be able to be assured that their best interests are always being put first," he said.