Future of Financial Advice regime in Australia
The latest development around the Future of Financial Advice (FoFA) regime is the release of further draft regulations whereby the Treasury proposes to tighten the application of the conflicted remuneration grandfathering rules. Conflicted remuneration is, broadly speaking, any payment given to a financial adviser, who provides financial product advice to retail clients, who could reasonably influence the advice given.
Conflicted remuneration is, broadly speaking, any payment given to a financial adviser, who provides financial product advice to retail clients, that could reasonably influence the advice given. Currently, the ban on payment of “conflicted remuneration” does not apply to benefits given by an operator of an investment platform or any other entity if the benefits are given under an “arrangement” that was entered into before 1 July 2013 - such arrangements are grandfathered. On a broad reading of the existing grandfathering regime, it is possible that “new” clients could be brought into an existing grandfathered arrangement - any fees paid by that client would then be grandfathered from the conflicted remuneration restrictions.
The proposed regulations seek to amend the legislation7 to provide that benefits paid by new clients under existing pre-FoFA arrangements will only be grandfathered where those clients have acquired an interest in the relevant product before 1 July 2014…
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