Financial Advice Reforms in Australia & New Zealand: Striking the Right Balance
‘Financial Advice Reforms: Striking the Right Balance’ in Shelley Griffiths, Sheelagh McCracken, and Ann Wardrop (eds), Exploring Tensions in Finance Law: TransTasman Insights (Thomson Reuters, New Zealand, 2014)
23 Pages Posted: 18 Nov 2016
Date Written: August 1, 2014
The Future of Financial Advice (FOFA) reforms in Australia are contained within the primary statute governing the activities of corporations and financial markets, namely the Corporations Act 2001 (Cth). In contrast, reforms in New Zealand have been made through a professional code. The rationales underpinning these reforms are similar, but the best interest and conflicted remuneration rules in each country vary in content and legal form. The essay considers the development of the financial advice industries in Australia and New Zealand by addressing the following questions: 1. Is financial advice likely to be provided in future decades as a professional service using a business model similar to those used by the legal, medical and accountancy professions; 2. What is the size and nature of the client base expected to seek and obtain financial advice; and 3. What is the scale of financial advice that must or should be provided by advisers? It highlights significant differences in the operation of financial advisory practices compared to other professional groups, and suggests that notions of industry professionalism, policy and community expectations concerning the role of financial advisers, and the remuneration structures of advisers require significant recalibration. While it is difficult to predict likely outcomes of the reforms, the essay suggests the legal structure in New Zealand is preferable because it carefully balances inherent tensions and is flexible. It notes that the FOFA reforms, in seeking a more purist approach, may discourage the emergence of an industry that provides efficient and fair services to all sections of the community.
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