FOFA set to give free kick to superannuation funds
The Government’s handling of Future of Financial Advice risks entrenching an inappropriate advantage for superannuation funds with respect to the provision of financial advice, writes Mike Taylor.
As the clock ticks down to Parliament giving final shape to the legislation which will govern the financial services industry over much of the next decade, politicians need to reflect upon whether they are going to succeed in creating an appropriate and level playing field.
Given that the Government is intent upon pursuing the implementation of its policies both separately and in tranches, there is a danger that the playing field which emerges in the next 18 months will not be level and that one sector of the industry will be advantaged over another.
Specifically, there is a danger that the Government will entrench an inappropriate advantage for superannuation funds with respect to the provision of advice.
This is because the Future of Financial Advice (FOFA) changes are being dealt with separately from those flowing from Stronger Superr, and the Government is not waiting for the findings of the Productivity Commission with respect to default funds under modern awards.
It may have been expedient for the Minister for Financial Services and Superannuation, Bill Shorten, to have introduced the FOFA legislation in a series of tranches, but it is something which has given rise to both uncertainty and a lack of confidence in the financial services industry.
Equally, it is hard for financial services companies to make effective commercial decisions when they know that the implementation of the FOFA changes is unlikely to be coordinated with the equally important introduction of the MySuper regime.
The level of uncertainty generated by the Government's approach was last week underscored by a letter written by Financial Planning Association (FPA) chief executive Mark Rantall, when he said the FOFA legislation to be considered by the Parliament in coming weeks "is not the whole reform agenda".
Rantall pointed out to members that the FPA was continuing to advocate around a proposed last resort compensation scheme, the replacement of the accountants’ exemption, the proposed national competency exam, restricted use of the term 'financial planner' and a tax agents services regime.
In other words, whatever form the FOFA bills may take following their passage through the House of Representatives, financial planning companies will find themselves still operating in a less than certain environment, with further legislative and regulatory changes in prospect.
Then, too, there is the reality that the arrangements around scaled advice remain up in the air, and concerns continue to exist around whether particular industry superannuation funds will continue to have an undue advantage because of the default funds under modern awards regimes.
The bottom line for the financial services industry is that while much is at stake, it seems unlikely there will be any real accounting of the combined impacts of the Government's changes until well after they are introduced.
On that basis, getting FOFA right may be on the industry's agenda for many years to come.
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