The bank’s are excited!
Our new Liberal government has decided to review and change the FoFA (Future of Financial Advice) rules. Have they sent us back into the consumer Dark Ages? They have allowed the large institutions to offer their own financial products without having a “fee for service” payment. Anyone within the bank could give financial advice over the counter and receive a commission, pay rise or promotion, especially if they are consistently good product sellers.
Even worse news is that advisors no longer will have a requirement to act in “the clients best interests”.
It’s left the consumers out in the cold again and makes independent financial advice even more rare and important. How can anyone give unbiased advice when they are being enticed by trailing commissions and payments from our large institutions
Storm Financial is not yet a distant memory and these changes will allow a similar scenario to eventuate again some time in the future. Storm Financial clients were enticed to borrow money against the collateral in their homes to buy shares and then to borrow more on the value of the rising shares. When the global financial crisis came many people lost everything, including their houses. The owners of Storm Financial charged up to 7.5% commission on every chunk of money coming into the business. They also paid financial advisors commissions on all clients referred to them. Quite a nice little earner for them at the expense of their clients.
These rule changes will mainly benefit bank tellers and people who work for Financial Advisory businesses which are largely owned by the big four banks. Financial Planners are still overseen by the Financial Planners Association and they have all agreed to still not accept trailing commissions. It’s the people in the industry that aren’t linked to the FPA who are going to possibly be a problem for consumers in the future.
I think the words “Buyer Beware” may become even more relevant if these changes make their way into law.