Assistant Treasurer and Minister for Financial Services, Bill Shorten, stirred up a great deal of anger and resentment recently by saying that he did not believe the key elements of the Future of Financial Advice (FOFA) changes would unduly impact financial planners.
When the Assistant Treasurer and Minister for Financial Services, Bill Shorten, addressed an Association of Financial Advisers (AFA) function last week he stirred up a great deal of anger and resentment by saying that he did not believe the key elements of the Future of Financial Advice (FOFA) changes would unduly impact financial planners.
In essence, Shorten was saying that he had heard the complaints and warnings of advisers, but would be doing nothing to change the Government’s approach with respect to the proposed two-year ‘opt-in’ or the banning of all commissions within superannuation. So there you have it. Financial planners should now accept that they know the key elements of the draft legislation that will flow from FOFA. Some minor discussion will likely take place around some of the finer details, but Shorten has made the Government’s position unequivocally clear.
Amid the negative planner sentiment that flowed from Shorten’s statement were suggestions that the major financial planning industry groups – including the AFA and the Financial Planning Association – had failed to do their jobs. This represented unfair criticism, given the amount of resources both organisations have dedicated to dealing with the Government’s FOFA agenda.
Anyone who has had to deal with Governments will know that the degree to which lobby groups can influence policy outcomes has more to do with applying political and economic pressure than producing cogent arguments. And in the case of the FOFA reforms, financial planning organisations have never represented a significant political or economic force.
Where the mining companies last year succeeded in having the Government water down its original Mining Super Profits Tax via a combination of high-priced advertising and political timing, the financial planning industry has neither the budgetary resources nor the electoral influence to pull off a similar feat.
Then, of course, there is the reality that the industry superannuation funds have not only maintained a vigorous advertising campaign but also kept the ear of Government via union and party affiliations – as well as the electoral influence that brings.
Amid the anger in the aftermath of Shorten’s address to the AFA came the renewed suggestion that the industry should mount a legal challenge to the FOFA changes, with the key issue being whether the imposition of an ‘opt-in’ requirement might represent a conflict with existing contracts law.
As a survey conducted by Money Management has revealed, there is strong support for such a challenge, with most respondents indicating they would be happy to help fund such a case. The problem, of course, is that such a challenge can only occur after the legislation becomes a reality – and by then it might be too late.
In the end, the strategy being pursued by the FPA and the AFA of seeking to influence amendments in the House of Representatives probably represents the best bet.
