Those who cannot remember the past are condemned to repeat it. Those words, attributed to George Santayana at the beginning of last century, would be ringing alarm bells for the Federal Government if only it were to closely examine the full range of consequences flowing from its Future of Financial Advice (FOFA) changes.
If the Government had cared to undertake a full regulatory impact analysis of its new legislation it might have quickly concluded that, in many respects, it was turning back the clock by as much as two decades. It might have recalled a time when financial planning was dominated by the major banks and insurers utilising tied agency arrangements.
Assuming the Government succeeds in navigating all of its FOFA changes through the Parliament, the industry after 2012/13 will look very much like the one which existed in the early 1980s, but with an additional player in the major institutional space – the industry superannuation funds.
In developing its FOFA legislation the Government has, as it should, examined a number of the impacts. But the regulatory consequences remain to be illuminated – and this is despite long-standing Commonwealth best practice arrangements which recommend regulatory impact analyses attaching to the implementation of major policy decisions.
According to the Department of Finance and Deregulation, Regulatory Impact Analysis (RIA) is the process of examining the likely impacts of a proposed regulation and a range of alternative options which could meet the government’s policy objectives.
The department says the Australian Government’s RIA requirements are intended to achieve better regulation by supporting:
- Sound analysis. The case for acting in response to a perceived problem, including addressing the fundamental question of whether regulatory action is required, needs to be demonstrated. The analysis should also outline the desired objective of the response, a range of alternative options to achieve the objective, and an assessment of the impact of each option, and should be informed by effective consultation.
- Informed decision-making. To help decision makers understand the implications of options for achieving the government’s objectives, they should be informed about the likely impacts of their decision, at the time they are making that decision.
- Transparency. The information on which government regulatory decisions are based should be publicly available.
So far as Money Management is aware, the Government has not yet published an RIA with respect to its FOFA changes, but it seems likely that financial planners will be intensely interested in the findings when and if such a document is finally made available.
Even before the Government’s legislative changes are introduced, there are clear signs of industry consolidation and the re-emergence of product manufacturers – the banks, insurance companies and industry funds – as dominant players in the financial planning landscape.
An RIA may not avert any of the unintended consequences of FOFA, but it would certainly make clear whether the financial planning industry is being condemned to repeat the past.
