Australian financial planners seem destined to end 2011 in much the same fashion they ended 2010 – uncertain about the fine detail of the regulatory regime which will underpin their industry for the next decade.
What became very obvious last week was that it may take until the middle of next year before the financial planning industry sees the final shape of the legislative and regulatory environment that will flow from the Government's Future of Financial Advice (FOFA) changes.
Notwithstanding the amount of time and effort expended by the financial services industry in dealing with the proposed policy changes, FOFA has always represented a second or third rank legislative priority for the Gillard Government. Thus, all focus in 2011 was on the carbon tax and the Mineral Resources Rent Tax (MRRT).
Given his much-reported political ambition and the role he plays in the Labor Party's factions, it is easy to forget that the Assistant Treasurer and Minister for Financial Services, Bill Shorten, is a junior minister who does not enjoy a seat at the Cabinet table with the likes of Prime Minister Julia Gillard, Treasurer Wayne Swan, or even Immigration Minister Chris Bowen.
Shorten’s lack of Cabinet seniority is therefore reflected in the level of priority given to the legislation he and his departmental officers generate. It follows that the FOFA changes were never something likely to reach finality in a Parliament focused on the carbon tax and the MRRT in 2011.
While Shorten has yet to indicate that there will be any changes to the timetable he and his financial advisers have linked to the introduction of the FOFA changes, there seems a better than average chance that the minister will need to grant an extension beyond 1 July 2012.
Such an extension would seem to be particularly necessary in circumstances where, at the time of writing, the minister had still not tabled the promised second tranche of his legislation, and when platform operators were making it clear that the consequent lack of certainty made it commercially risky to appropriately rework their architecture.
High levels of uncertainty and an element of commercial risk almost always attend legislative changes, but Shorten's approach to FOFA has proved particularly problematic for those seeking to plan and grow their businesses in the financial services industry – something which has been highlighted by his announcements around insurance in superannuation and annual fee disclosure statements.
These represented just two occasions on which the minister first announced an eleventh hour change to an important element of policy, only to later offer concessions on the basis that the Government might have gone a step too far.
It is on this basis that financial planners should look to enter 2012 planning for the worst, but hoping for the best.
