FOFA, not Commbank is Labor's target

Do not be mistaken. The reason the Australian Labor Party last week sought to have yet another Senate Committee traverse the Commonwealth Financial Planning (CommFP) debacle is all about seeking to defeat the Government’s efforts to change the Future of Financial Advice (FOFA) legislation.

By gaining the support of the Greens and the cross-benchers in the Senate for yet another Committee inquiry, the Labor Party at the very least, hopes to succeed in achieving the disallowance of the FOFA regulatory changes announced by the Minister for Finance and Acting Assistant Treasurer, Senator Mathias Cormann.

So Cormann is absolutely right when he asserts that the Leader of the Opposition and former Minister for Financial Services, Bill Shorten, is being a political opportunist in seeking to leverage the apparent support of Palmer United Party founder, Clive Palmer.

All of this explains why the trevails within Commonwealth Financial Planning must now be regarded as more damaging to the overall interests of the financial planning industry than the collapse of Storm Financial Limited or, indeed, the collapse of Westpoint.

It also explains why the Financial Planning Association (FPA) has been so overtly critical of the cultural and managerial elements which led to the events within CommFP and why it has so strenuously maintained its call for a formal separation between the selling of product and the provision of advice.

As Money Management has pointed out before, the Commonwealth Bank can be counted both unlucky and clumsy.

Unlucky, because the reasons which led to its enforceable undertaking were leveraged by the Labor Party and the industry funds to resist the Government’s changes to FOFA. Clumsy, because of the loose ends which emerged in the compensation arrangements fl owing out of that enforceable undertaking.

It is now inevitable that the Comm FP enforceable undertaking will be joined within Storm Financial, Westpoint and Trio/Astarra in the growing lexicon of misdeeds which the critics are readily laying at the feet of financial planners.

But what should not be overlooked in the situation confronting the Commonwealth Bank is the fact that while every opportunity is being taken to assume the high moral ground, political/commercial agendas are at play, not least the linkages between the Australian Labor Party, the trade union movement and industry superannuation funds.

There can be no question that Industry Super Australia helped inspire the fi nal shape and texture of Bill Shorten’s FOFA legislation and there can be no question that it has a vested interest in ensuring that legislation remains unchanged.

That objective has been made a whole lot easier by the media attention that has been focused on the Commonwealth Bank.

While there is no overwhelming justification for the Government to sanction a Royal Commission or judicial inquiry into what occurred within CommFP, political expediency and the long-term interests of the financial planning industry might be better served if it did.