THIS week, financial planners will circle a new date in their diaries: July 1, 2012.
The financial planning industry will undergo momentous change from that day. It will mark a new age for financial planning based around a fee for service charging model that aims to make the cost of advice much more transparent and aligned with the investor’s best interests.
Under Federal Government proposals announced yesterday by the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, financial planners will be barred from charging commissions relating to the distribution and provision of advice.
Advisers will also have to comply with a statutory fiduciary duty to act in the best interests of their clients.
Many of these recommendations are a direct response from the collapses of financial planning groups like Storm Financial and Westpoint where retail investors suffered heavy losses and led to a parliamentary joint committee inquiry into financial products and services, chaired by Bernie Ripoll.
Out of the 11 recommendations made by the Ripoll inquiry eight have got support from the Government but a key difference is that where the inquiry recommended consultation with the industry on how to stop payments from product manufacturers Bowen has taken a stronger stance and announced the ban effective from July 2012.
The other key measure which the Government added to the reform package is likely to surprise accounting groups. The Government is proposing removing an exemption that allows accountants to provide advice on the establishment and closing of self-managed super funds without holding a financial services licence.
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Robin Bowerman, Vanguard Investments Australia's Head of Retail, has more than two decades of experience in the finance industry as a writer, commentator and editor.
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