Who picks up the costs of rushing FOFA?
If the Minister for Financial Services and Superannuation, Bill Shorten, did not already have enough reason to announce appropriate transition periods for implementation of the Government's Future of Financial Advice (FOFA) and Stronger Super legislation, he might consider the state of the financial services industry and the broader economy.
In just the opening seven weeks of 2012, some of Australia's largest financial services institutions have signaled their intention to cut jobs and reduce costs in the face of continuing highly volatile markets and clear signals that they will not necessarily be able to maintain the levels of profitability they enjoyed in 2010 and 2011.
Last week’s announcement by Macquarie Group of its intention to cut jobs and reduce costs should be seen by the Government as clear confirmation that the financial services industry is under stress, and that best interests will be served by delivering a more certain environment and a graduated approach to change.
Notwithstanding the political hothouse generated by minority Government, endlessly negative public opinion polls, leadership speculation, and the possibility of an election being forced at short notice, the Gillard Government owes it to the financial services industry to ensure both FOFA and Stronger Super are implemented in an orderly fashion over appropriate timeframes.
Were Shorten to consult with the companies impacted by his Government’s changes, he would be told that notwithstanding a continuing lack of detail, they have already invested large amounts of money in preparing their infrastructure in the expectation of change.
Those companies would doubtless also inform the minister that the further impact on their budgets will be decidedly less if the Government allows for an orderly transition to the new regime and better alignment between the implementation of FOFA and Stronger Super.
The Government's FOFA legislation represents the most far-reaching change to be imposed on a key sector of the economy since the implementation of the Financial Services Reform Act (FSRA), and the speed with which it is imposed ought to have nothing to do with the longevity of the Government itself or the requirements of the Government's central support base.
FSRA was implemented at a time of relative economic buoyancy and – notwithstanding the so-called "tech wreck" – a time when markets were barely at the mid-stage of what turned out to be the longest bull-run in recent history.
Even allowing for the relative buoyancy in the economy and the markets which existed in 2002/03, the former Howard Government allowed a sensible transition to the changes inherent in FSRA.
The Gillard Government should act similarly in 2012/13.
If the Government seeks to implement in haste, the financial services industry will be made to count the cost for many years to come.
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