Facing the truth about FOFA
If the parliamentarians involved in the Parliamentary Joint Committee reviewing the Future of Financial Advice (FOFA) bills put aside their political affiliations then they will back some key amendments to the FOFA bills.
Any reading of the more than 60 submissions to the Parliamentary Joint Committee (PJC) reviewing the Future of Financial Advice (FOFA) bills reveals that members of the committee are faced with some challenging decisions.
If those parliamentarians put aside their political affiliations and ideology and base their decisions upon the weight of arguments contained in the submissions, then they will back some key amendments to the FOFA bills. In particular, they will look to eliminate some of the contradictions and timing issues.
If the financial planning industry is lucky, the parliamentarians making up the PJC will adopt the same sort of objective approach to the issues being reviewed which informed the bipartisan report issued by the first Ripoll Inquiry flowing from the collapse of Storm Financial.
However, the political factors influencing both the balance of power in the Parliament and the balance of power in the Australian Labor Party caucus make it much more likely that the committee will fail to find the common ground necessary to agree the basis for significant change.
In the absence of a bipartisan agreement on the need for change, the Government will feel free to offer some token softening of its bills, but to act largely as it sees fit.
It is in these circumstances that planners – if they have not done so already – should pragmatically assess what it is they need to do to survive and thrive over the next 12 to 24 months. On the available evidence, most seem to have done so.
The Government may allow a transition period of up to 12 months, but this is by no means guaranteed and is a concession which has been openly opposed by a number of the industry super funds.
There is no guarantee that the ALP will lose the next federal election, but the polls have been unremittingly bad for the Prime Minister, Julia Gillard. Further, Australian political history suggests such deeply entrenched trends are rarely reversed.
Indeed, history suggests that even if the ALP were to again change leaders, it would be most unlikely to be able to change the ultimate outcome at the ballot box.
Nonetheless, the financial planning industry must accept that it faces up to 24 months of dealing with the FOFA regime which evolves out of the current Parliament – the amount of time it is likely to take before a Coalition Government might move for change.
Further, the planning industry must accept that while a Coalition Government might seek to rescind elements such as the two-year opt-in, the vast majority of the FOFA regime and the business models it dictates will remain intact.
One way or another, 2012 marks the beginning of long-term change for financial planners.
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