Grant Holley of HOLLEY NETHERCOTE commercial & financial services lawyers recently published a terrific article relating to the Future of Financial Advice (FOFA) reforms, FOFA changes to best interests – A storm in a tea cup?.
He points out “Much of the commentary by proponents and opponents [of the changes to the best interests duty that applies to financial advisers], although well intentioned, exaggerates the impact of the changes to such an extent as to mislead the reader about the protection that the law affords to consumers of financial product advice”. I couldn’t agree more.
Grant explains that, regardless of the statutory best interests duty, aggrieved clients of financial advisers have various causes of action that they can pursue, including, for example, breach of contract and professional negligence.
I would also add that most clients of financial advisers also have the ability to make a complaint to an external dispute resolution scheme, which can make decisions that bind the financial adviser (or their licensee) but that don’t bind the client. This is a free resource for clients. The most popular scheme is the Financial Ombudsman Service (FOS), which has dispute resolution criteria in its terms of reference that authorise it, “when deciding a Dispute and whether a remedy should be provided”, to do “what in its opinion is fair in all the circumstances”, having regard to (but not being obliged to adhere to) various factors including legal principles, applicable industry codes or guidance, good industry practice, and previous relevant decisions of FOS or a predecesor scheme. This is a protection to which consumers of most of other products and services do not have access.
I’m not an apologist for the Abbott government by any means, but I think the recent changes were for the most part a good thing and not nearly as problematic as they were painted to be. (Clive Palmer & co’s contributions? Insubstantive red tape.)
On that point, I find it interesting that the changes to FOFA have received so much publicity, when the government has made what in my view will have a much more significant impact on how the financial advice industry is regulated. Which is the 30% reduction in funding for ASIC that it announced as part of its budget. In my opinion ASIC wasn’t sufficiently resourced in the first place. Reducing funding will have a much bigger impact on how the financial advice industry is regulated than any of the changes to the FOFA reforms.