The Government's pursuit of its FOFA reforms has degenerated into trench warfare, with the financial planning industry 'digging in' to fight the changes
As any good general ought to know, the key to achieving a strategic objective lies in having a sound understanding of the disposition of all the combatant forces.
If the Assistant Treasurer and Minister for Financial Services, Bill Shorten, had understood this relatively simple military fact, then it is entirely probable that he would today be much closer to achieving the central objectives of the Government’s Future of Financial Advice (FOFA) changes.
If he had only realised it, a window of opportunity existed in April for Shorten to gain grudging but nonetheless effective industry support for the key elements of FOFA.
The major planning groups believed they had been making progress in their discussions with Treasury and the Government and there was a belief that enough compromises might be achieved to even make a form of ‘opt-in’ palatable.
All that changed the day Shorten outlined the Government’s final position on FOFA, which not only included the somewhat expected two-year opt-in but also included the ban on commissions on life/risk inside superannuation.
To coin the old military cliché, Shorten’s inclusion of the life/risk commissions ban within superannuation represented ‘a bridge too far’.
The Government might have been able to secure grudging industry acceptance of a two-year, three-year or even five-year opt-in, but it ruined its chances the day Shorten embraced the notion of banning commissions on life/risk in super.
The result has been that the Government’s pursuit of its FOFA agenda has moved from being a highly mobile campaign based on some pragmatic assessments of what is reasonably ‘doable’ into some old-fashioned trench warfare with the planning industry having ‘dug in’ to fend off what it sees as ‘twin nasties’.
Shorten indicated in his recent address to the Association of Financial Advisers (AFA) that the Government, having heard the arguments of the financial planning industry, would not be changing its approach on opt-in or on life/risk commissions in super.
However, there is every indication that he is uncomfortable with the amount of pushback he has been getting from some sections of the financial planning industry, and the likelihood that it will be reflected in amendments imposed on the legislation he ultimately takes to the House of Representatives.
While recent surveys conducted by Money Management and others have suggested that financial planners are totally opposed to the FOFA package, this overlooks the reality that many of the proposed changes – such as a best interests requirement and fee-for-service – have already been embraced by the industry.
In these circumstances, Shorten might consider taking a leaf out of the playbook of former Prime Minister Bob Hawke – the pragmatic industrial negotiator who understood that good legislative outcomes were delivered by understanding what needed to be achieved and then finding sufficient common ground among the key stakeholders.
Hawke would not have gone a ‘bridge too far’.
