Following lengthy discussions lead by the FPA, the Minister for Financial Services Bill Shorten last week indicated that the Federal Government would reverse a decision to ban commissions on insurance inside Superannuation on personal advice.
Whilst welcoming this review, the FPA also continues to call on the government to review its position on opt-in ahead of the release of draft legislation due out in coming weeks.
“Opt-in is an onerous proposal that won’t benefit Australians seeking financial advice,” FPA CEO Mark Rantall said.
“We have welcomed, and lead the way, in introducing a best interest duty and the banning of commissions on investments, which in effect make opt-in a redundant policy.
“No other profession is subject to such a policy and it will not lead to improved outcomes for consumers.”
Mr Rantall cites current market uncertainty as a prime example where opt-in would not benefit the consumer. Noting that if a client failed to opt-in last week, for example, they would no longer be in a position to be notified or advised by their planner.
“It is the ongoing relationship between financial planners and their clients that enable planners to immediately act, provide advice and reassure clients to enable them to make rational decisions,” Mr Rantall said.
“The proposed opt-in requirement could put at risk planners ability to provide a critical response during crisis situations and market uncertainty such as all Australians are faced with now.”
“This week’s volatility is a perfect illustration of the dangers of opt-in.
This week, ASIC has also claimed that not having opt-in may mean that consumers could pay for advice they do not receive due to asset based fees.
“This is utter nonsense.” Mr Rantall said. “If the issue is either asset based fees or ongoing fees then let us have that debate. It has nothing to do with opt-in. You can still have an ongoing fee that is not asset based and provided it is not embedded in a product then the client has total control over whether or not they continue to pay that fee.
“While we accept the sentiment and strongly agree that it would never be conscionable to charge a consumer for a service they are not receiving, it is paternalistic to the extreme to use as an excuse that people don’t read their statements or paperwork as a reason to have opt-in.”
“By all means give clients the opportunity to opt-out every year, but forcing clients to have to opt-in is an added burden they shouldn’t have to bear,” Mr Rantall said
Mr Rantall noted a number of other consequences associated with opt-in: