FOFA now a totem Labor issue

Australian financial planners must now accept that the Future of Financial Advice (FOFA) legislation is a totem issue for both the industry superannuation funds movement and the Australian Labor Party. 

Only this can explain why the Federal Labor Opposition has persisted through most of a year of the current Parliament and despite two previous set-backs to garner the numbers in the Senate to rescind the regulatory changes to FOFA so carefully crafted and negotiated by the Minister for Finance and Acting Assistant Treasurer, Senator Mathias Cormann. 

It is not unusual for an Opposition to make a couple of attempts to stymie Government regulations it finds objectionable, but Labor's persistence with respect to the FOFA regulations makes clear that the original FOFA legislation is part of foundation Labor policy. 

The status the party has given the FOFA legislation may be owed to the fact that it was devised by the leader of the Opposition, Bill Shorten, when he held the Financial Services portfolio though it is vastly more likely that it is owed to the persistence and influence of the industry superannuation funds movement. 

It should have escaped no one's attention this year that Industry Super Australia (ISA) mounted a vigorous campaign aimed at heading off the Government's amendments and regulatory changes to FOFA, including adding fuel to the fire burning around the problems which beset Commonwealth Financial Planning. 

VIEW ALL

View all

But as hard as the ISA and Labor worked to stymie the Government's FOFA changes, Cormann proved to be up to the challenge of gaining enough support in the Senate to ensure his regulatory agenda remained intact, mainly thanks to the leader of the Palmer United Party, Clive Palmer. 

Of course, all that changed last week because of the fractures which occurred resulting from the position adopted by Palmer United Party Senator, Jackie Lambie, on a totally unconnected issue, defence force remuneration. 

Having said she would oppose Government legislation until ground was conceded on Defence Force pay rises, Lambie appears to have been as good as her word in supporting Labor's motion. FOFA might not have been the most important Government policy on which Labor could have unleashed the "Lambie card", but that was the one it chose. 

The reaction of the major planning organisations - the Financial Planning Association and the Association of Financial Advisers - was both predictable and correct, particularly their assessment that the rescission of the regulatory changes would place many dealer groups and financial planners in legal jeopardy. 

However they were vastly more correct in their assessment that the rescission move would give rise to damaging levels of continuing uncertainty. This is certainly the case because the planning industry must now accept that irrespective of whether Cormann managed to swing the Senate numbers against Labor, the issue will remain the subject of political volatility at least until the next Federal Election. 

The difficulty for the financial planning industry in resisting Labor's strategy is that the public relations battle has largely been already lost as a result of the ongoing adverse media coverage which has surrounded Commonwealth Financial Planning, the enforceable undertaking imposed on Macquarie Bank and the continuing fall-out from other financial services collapses.  

The simple bottom line for planners is that no matter what the reality may be, Labor and the industry funds have assumed the moral high ground and have enough media backing to ensure they won't be easily dislodged.