FOFA concessions may have an expiry date
Mike Taylor writes that the Federal Opposition has signalled some of the so-called ‘concessions’ extracted around the passage of the FOFA bills may not have a life beyond the next Federal Election.
There are no guarantees that a Coalition government will legislate to restrict the use of the terms 'financial planner' and 'financial advisers'.
The Opposition spokesman on financial services, Senator Mathias Cormann, has made it very clear to Money Management that the Coalition has yet to be persuaded that the increased regulation necessary to achieve such a restriction is warranted.
Further, Cormann pointed out that the term ‘accountant’ is not currently "enshrined in legislation".
Given Cormann's comments and the relatively short time between now and the next federal election, one of the key ‘concessions’ to emerge from the deal which saw the passage of the Government's Future of Financial Advice (FOFA) bills through the House of Representatives would seem to have a limited future.
The other key ‘concession’ to emerge from the eleventh hour FOFA deal – "class order relief from opt-in for members of an ASIC-approved code-issuing body" – remains of dubious value until such time as the Australian Securities and Investments Commission (ASIC) spells out the precise regulatory detail.
Statements issued by senior executives within ASIC, including commissioner Peter Kell, suggest that the reason adherence to a code of conduct will obviate the need for opt-in is that all approved industry codes of conduct will need to cover off on such an obligation, in any case.
Concessions were, indeed, extracted in the negotiation and consultation processes which led up to the passage of the FOFA bills through the Parliament, but the prizes which seemed to sit at the heart of the more singular eleventh hour deal now appear to be of highly dubious value.
While Australian financial planners will enter a new financial year knowing only a little more about the regulatory environment in which they will be expected to work, they will do so in the knowledge that they will have another 12 months to transition to the new arrangements.
Then, too, they will know that within six months of the new FOFA arrangements being fully in force, the Government will face a federal election which every single poll suggests it is fated to lose, comprehensively.
Given his performance in financial services while in Opposition, it seems highly likely that Cormann would be granted carriage of the portfolio in any Coalition Government – something which would ensure his memory of the events leading up to the passage of the FOFA bills is carried forward into his ministerial oversight of the industry.
Members of the Association of Financial Advisers (AFA) will get some insight into Cormann's view, given that both he and Kell have agreed to be part of the AFA's national roadshow over coming weeks.
Cormann's reluctance to commit to enshrining the terms ‘financial planner’ and ‘financial adviser’ is not borne of any lack of support for financial planning becoming a profession, but rather, a concern that it might give rise to further unnecessary bureaucracy and competitive distortions in the sector.
The Coalition spokesman's view is that professionalism in the financial services industry is better pursued via the setting of higher educational standards objectively and independently administered by educational institutions and professional standards imposed by relevant bodies like the Financial Planning Association (FPA), the Self-Managed Super Fund Professionals' Association, and the AFA themselves.
Given all that has occurred over the past 12 months and the regulatory and political uncertainties ahead, the next 18 months will represent a testing time for the FPA which has clearly staked out its position with respect to FOFA and the manner in which some of the key concessions were achieved.
The FPA has been a long-time advocate of enshrining the term ‘financial planner’, and will find little comfort in the fact that the Coalition is not committed to such a move, while the Minister for Financial Services and Superannuation, Bill Shorten, has yet to follow through with the necessary legislation.
While the FPA has suggested in some publications that industry commentators have sought to stir up fear surrounding FOFA, such suggestions overlook the long list of unknowns still confronting financial planners amid not only the FOFA-based regulations but the impact of Stronger Super and even the Productivity Commission's review of default funds under modern awards.
If planners doubt the cumulative impact of those changes, they should consult some of the compliance personnel working long hours behind the scenes seeking to piece together both the knowns and the unknowns.
By expressing his doubts about the need to enshrine the terms ‘financial planner and financial adviser’ in legislation, Senator Cormann has reminded planners that the curtain has yet to fall on all the changes to their industry and that, indeed, the fat lady might ultimately sing a different song.
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