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How changes to financial planning laws could affect you

The Coalition government's proposed amendments to the FOFA legislation could cause quite a stir. Personal finance editor John Collett and columnist David Potts report.

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The Coalition government is pushing to have the law changed so that bank tellers can sell an unlimited range of financial products across the counter.

Assistant Treasurer Arthur Sinodinos has signalled the government will introduce the first of several amendments to Labor's Future of Financial Advice (FOFA) reforms to Parliament next week.

"It is not like (customers) get signed up on the spot": Federal assistant treasurer Arthur Sinodinos.

"It is not like (customers) get signed up on the spot": Federal Assistant Treasurer Arthur Sinodinos. Photo: Rob Homer

Laws were introduced last year by the former Labor government to better protect consumers seeking financial advice following a string of financial planning disasters that cost investors billions of dollars. Under Labor's reforms most commissions and other types of "conflicted" remuneration - pay that can influence the type of advice provided - are banned. Conflicted pay includes non-monetary kickbacks for achieving sales targets and higher commissions for recommending one product over another.

Conflicted pay is banned whether financial products are sold under "general" advice or by financial advisers under "personal" advice, though commissions are allowed on some types of insurance.

But now the Abbott government is proposing bank tellers, planners and call-centre workers who are employees or agents of deposit-taking institutions - banks, credit unions and building societies - be exempt from the ban on conflicted pay as long as the advice is general. Tellers selling more complex products would have to do some additional training.

Leon Carter, national secretary of the Financial Sector Union, said: "This is what the banks lobbied for; they want to have unfettered access to every customer and they want their staff to sell regardless of the needs of the customer."

Matt Levey, director of campaigns at consumer group Choice, said the amendment would mean more people being given general advice by tellers incentivised by commissions. Fewer people would likely receive personal advice, he said. "It is a sales pitch driven by a commission with no relevance to the person's financial circumstances."

Under the FOFA reforms general advice on simple banking products, such as term deposits, and on general insurance continued to be exempt from bans on conflicted remuneration. The government's proposed amendment widens that to any financial product as long as the advice is general.

Senator Sinodinos said this amendment and others are needed to cut red tape and reduce the costs of doing business.

Senator Sinodinos told ABC's Lateline on Tuesday that bank tellers would have to tell customers that the advice is general and does not take into account their personal circumstances. Customers who received general advice would be subject to a cooling-off period. "They take away the product disclosure statement and they can look at [it] in the context of their particular circumstance and make their own decision," he said. "It is not like they get signed up on the spot."

John Flavell, executive general manager of wealth advice at National Australia Bank, said the exemption for general advice was needed.

He said there was a "massive" gap in the market where people do not have adequate insurance cover and were not saving enough to be able to afford comfortable retirement.

"If we can remove some of the costs and complexity and make the provision of wealth solutions available to more consumers that would be a positive outcome," he said.

The banks have lobbied hard for the amendment. Distribution of financial products by teller staff is cheaper than distribution by financial planners so there would be additional financial gains for the banks.