Financial planners take the brunt of a tough year
As 2011 draws to a close, it is worth reflecting upon what a challenging year it has been for Australian financial services generally and financial planners in particular.
The term ‘perfect storm’ has become somewhat clichéd but could quite appropriately be applied to Australian financial services in 2011, as financial planners not only had to witness the uncertainty and consequent volatility generated by Europe's sovereign debt, but also the political uncertainty generated around debt in the US as well as the efforts of Australia's first minority federal government in more than 50 years.
It is fair to say that Australian financial planners started 2011 uncertain how it would end. They will likely start 2012 with the dynamic hardly changed.
Few readers will be surprised to learn that an analysis of Money Management's news pages for 2011 reveals that the most talked-about issue was the Government's Future of Financial Advice (FOFA) changes and the manner in which they were handled by the Assistant Treasurer and Minister for Financial Services, Bill Shorten.
When the year began, Shorten remained an unknown quantity for the industry, but that quickly changed as his handling of FOFA cast him as having maintained his close links with the trade union movement – and therefore being allied to the views of the Industry Super Network (ISN).
The degree to which Shorten's union links seemed to be reflected in the Government's policy approach appeared allied to the occasions on which policy formulation veered away from the recommendations of the Ripoll Inquiry to embrace elements such as ‘opt-in’, the banning of commissions on life/risk sales inside superannuation, and annual product disclosure statements.
By the time the first tranche of the FOFA legislation had been introduced to the Parliament, financial planners seemed justified in their suggestions that the Government was pursuing an agenda to extend the influence of the industry super funds at the expense of the financial planning community.
At the same time, the Government seemed oblivious to the fact that one of the unintended consequences of FOFA was vertical integration and the re-emergence of the old tied-dealer models of the past.
While some financial planners have been critical of the inability of the Financial Planning Association and the Association of Financial Advisers to negotiate substantial changes to the FOFA package, such criticism is unfair in the context of the single-minded approach the Government chose to adopt.
With the balance of power in the House of Representatives having being altered with a change in speakers in late November, financial planners must now accept that most of Shorten's FOFA changes will flow through the Parliament unamended.
In short, they will have to navigate the second half of 2012 in a fully-fledged post-FOFA environment.
The polls and Australia's political timetable mean that financial planners must push for the changes they want to occur via a Coalition Government in 2013/14.
In the meantime, on behalf of the Money Management team, I wish all our readers a safe and happy Christmas and New Year.
AUTHOR
Mike Taylor
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