Narrow focus limits broader FOFA vision

A strong line of argument is being pursued by sections of the financial planning industry that the Government has been focusing its Future of Financial Advice (FOFA) changes far too narrowly.

The argument being pursued by groups such as Professional Investment Services (PIS) is that many of the failures which have served to taint public perceptions of the financial planning industry have been failures of product rather than failures of advice. And, of course, in many instances this is true. With the exception of Storm Financial, the majority of the other collapses – Westpoint, Trio/Astarra, et al – could best be described as failures of product, therefore justifying the argument that the focus of FOFA must be broadened to encompass the manufacturers and their salesmen.

But that does not mean those providing advice can ever succeed in distancing themselves from the roll-call of corporate collapses and product failures which have so severely eroded the reputation and public standing of financial planners over the past decade or more.

The problem for those who would argue too strenuously about past product failures is that too many financial planning firms were seen to be closely tied to the failed products by highly lucrative commissions-based remuneration regimes.

The reality confronting many good financial planners is that they have found themselves being made to pay for the sins of others and that an appropriate distance will only be created when the public accepts that their industry and its practices have changed with all conflicts removed.

That is why, while the Government’s execution of its FOFA agenda may leave much to be desired, many of the broad objectives remain worthwhile.

A recent survey conducted by Money Management revealed a significant majority of respondents could think of nothing positive to say about the Government’s approach to FOFA, but this overlooks a number of initiatives such as the ‘best interests’ test which have been pursued at the behest of planners themselves.

Indeed, it is arguable that stripped of elements such as the two-year ‘opt-in’ and the somewhat extreme decision to ban commissions on all life/risk products within superannuation, the Government’s FOFA approach would be capable of garnering support from most of the key stakeholders.

The FOFA proposals grew out of the bipartisan findings of the so-called Ripoll Inquiry. An astute minister would recognise the value of bipartisanship in actually delivering new legislation.