The modification of the opt-in proposal and allowing commissions on retail life insurance has been welcomed in some quarters. But the critics of Assistant Treasurer Bill Shorten’s Future of Financial Advice (FOFA) draft bill are continuing their opposition.

Financial Services Council CEO John Brogden says the release of the first part of the legislation will “address some of the uncertainty” regarding the reforms and the implementation date of July 1 next year.

“In relation to the opt-in measure, we believe the two-year timeframe and the clarification that it will only apply to new clients makes the reform workable,” he said.

Asteron Head of National Sales Mark Vilo says the company welcomes the flexibility of the proposed opt-in approach, including the use of electronic contact. However, it is still concerned about the cost to advisers.

He says Mr Shorten used Rice Warner’s figure of $11 a client for opt-in, but other industry sources put the cost at between $50 and $100.

“There is a danger of underestimating the amount of time and effort that will now have to go into the preparation of yearly communications to clients advising about fees and the type of service they will receive,” Mr Vilo said.

He says the proposal not to ban commissions on retail life insurance in superannuation is a good outcome.

The Government’s strongest critic on FOFA, the Association of Financial Advisers (AFA), isn’t impressed with the draft bill.

CEO Richard Klipin says the legislation needs to provide consumers with access to quality advice and remove conflicts of interest, but “on both counts the FOFA draft legislation has failed”.

“It uses a heavy-handed approach to force change without a shred of independent research, without any Treasury modelling or rigour and with no clear evidence as to the impact and consequences for consumers, advisers and the industry.” 

Mr Klipin also questioned the use of Rice Warner’s research, commissioned by the Industry Super Network (ISN).

“The inclusion of the ISN research and the exclusion of all other valid research on the topic of opt-in is flabbergasting and, in our opinion, quite simply, wrong,” he said.

“The minister in this regard is not acting in the public interest, but in the interest of industry super funds.”

Shadow Assistant Treasurer Mathias Cormann has also attacked the influence of the industry superannuation funds on the draft legislation.

“Bill Shorten continues to target small businesses and financial services competing with his friends in industry super funds instead of pursuing a balanced policy in the public interest,” he said.

“His approach to FOFA appears conflicted and unbalanced.” 

ISN CEO David Whiteley says the FOFA reform agenda is a moderate package that will impose a new obligation for financial advisers to act in clients’ best interests.

“All that is being required of financial advisers is that they ask their clients every two years if they can continue to deduct fees,” he said.

“This will align the provision of advice with the payment for advice, an entry level requirement for any professional.”