FOFA needs a balanced approach

The Government needs to consider all sides of the debate as it prepares to release the Future of Financial Advice draft legislation, writes Mike Taylor.

When the Assistant Treasurer and Minister for Financial Services, Bill Shorten, last month released the Government’s latest Future of Financial Advice (FOFA) approach, most financial planners assumed they had seen the final iteration before the presentation of the draft legislation.

Shorten’s announcement gave rise to a flurry of responses from the financial planning industry with particular concern being expressed about the proposed two-year opt-in arrangement and the intended banning of all life/risk commissions within superannuation.

However, in the weeks that have followed Shorten’s FOFA announcement and the handing down of the Federal Budget the battlefield dynamics have changed again with, on one side, the Federal Opposition signalling it will be opposing the FOFA changes in their present form and independent Rob Oakeshott expressing his concern about the opt-in arrangements.

On the other side of the equation, however, a strong campaign has been waged by industry fund advocates to tighten the penal provisions flowing from the changes and the minutiae of the “best interest duty” in a way that would increase the burden and the dangers confronting financial planners.

Of course it is in the nature of lobbying Governments in Canberra that particular groups will selectively brief the media to portray their own arguments in the best possible light but the tenor of recent reports should place the financial planning industry on its guard.

This is something that has been recognised by the chief executive of the Association of Financial Advisers (AFA), Richard Klipin who last week warned that the industry funds were seeking to drive policy formulation in Canberra

“The financial advice industry is now looking to the Government to see past the hysteria being stirred up by the industry funds and consumer advocate groups and provide independent modelling which proves FOFA reforms will result in better outcomes for consumers,” he said.

Klipin is right in arguing for an objective and balanced approach, but he must also know that the balance of power in the House of Representatives means that nothing Shorten takes into the Parliament represents a legislative fait accompli.

While the industry funds may, indeed, have the ear of the Government the final shape of the legislation will be a matter for debate and, probably, amendment.

The current speculation and the manner in which particular positions are being promoted makes it imperative the Minister releases the draft legislation as soon as possible.