FOFA's failings come into focus as time runs out
The financial planning industry understands that time is running out to extract key amendments to the Future of Financial Advice bills and, as Mike Taylor writes, the industry has distilled its concerns down to five key issues.
The financial planning industry was not surprised by the fact the Parliamentary Joint Committee (PJC) reviewing the Future of Financial Advice (FOFA) bills failed to issue a bipartisan report on recommended amendments. What surprised the industry was the vehemence of Government members of the PJC.
The report – signed off by the Government members of the PJC – not only failed to recommend any significant amendments to the FOFA bills, it served to negate the possibility of the Minister for Financial Services and Superannuation, Bill Shorten, delivering further concessions.
In contrast, the Opposition members of the Committee issued a dissenting report recommending 16 amendments to the FOFA bills, including the elimination of opt-in.
The content of that dissenting report is already forming the basis of the Coalition's approach to the upcoming debate around the FOFA bills in the House of Representatives.
In the wake of the PJC findings and recognising the reality that amendments will not easily be won, the financial planning industry has focused all efforts on the independents in the House of Representatives, and has distilled its concerns about the FOFA bills to just five key issues.
Those five key issues are:
- Removal of retrospective fee disclosure requirements.
- Removal of the opt-in obligation.
- Improve the clarity and certainty with the best interests duty.
- Adequately ensure that the ban on conflicted remuneration is not applied retrospectively.
- Delay commencement until the industry can be prepared.
Those five key issues have been outlined in letters written by the Association of Financial Advisers (AFA) to each of the independents, as well as all Government and Opposition members and Senators.
However, the realists in the industry suggest that of the five issues, only two or three are likely to be achieved – removal or amendment of opt-in, a delay or phased introduction of FOFA, and perhaps some refinement of the wording around best interests duty.
The precise arguments put to federal parliamentarians ahead of the FOFA bills debate are outlined in the table below.
Explaining his organisation's approach, AFA chief executive Richard Klipin said that after observing events in
He said the AFA analysis was that much of the content of the Government's PJC report reflected a misunderstanding of many of the issues raised by the industry during the committee hearings – not least, the need for clarity around best interests duty.
In the final countdown to the House of Representatives debate on the FOFA bills, both the AFA and the Financial Planning Association have exhorted their members to maintain pressure on the independents and local members to achieve the necessary amendments.
However, the tenor of the Government's PJC report has served to dampen their optimism about what can actually be achieved.
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