In summary, the proposed benefits of the reforms are:
- adviser interests will become aligned with client interests, leading to more client-focused advice and greater adviser engagement with clients;
- product recommendations will not be influenced by commissions given to advisers by product issuers;
- clients will be less likely to suffer detriment as a result of excessive fee arrangements or sub-optimal investment strategies;
- a more competitive advice market;
- greater availability of advice;
- advisers will be discouraged from recommending imprudent investment strategies, for example, strategies that rely heavily on borrowed funds;
- a reduction in product fees which will result in significant savings for consumers; and
- less rogue advisers in the industry….assuming there are many rogues!
Consumers are the primary focus of the reforms and the Government believes that consumers will greatly benefit from a structural change in the financial advice industry in a way that will outweigh the implementation costs to industry. Overall, the quality of financial advice will improve, leaving Australians better equip to make decisions about their finances.