Looking beyond FOFA disappointments
2014 was stacking up as a good year for the financial planning industry until the first day of the Financial Planning Association (FPA) national congress in Adelaide, last month - the same day on which the Senate voted to disallow the Government's Future of Financial Advice (FOFA) changes.
Notwithstanding the compromise reached a week later between the Government and the Federal Opposition on some of the fine detail of FOFA, the reality confronting financial planners as they look ahead to 2015 is that they must accommodate some of the legislation's most aggravating elements, particularly "opt-in".
While both the FPA and the Association of Financial Advisers (AFA) have signalled they will continue to lobby the Opposition and minor parties, the reality which must be accepted by financial planners is that the Government simply cannot command reliable numbers in the Senate to achieve its policy objectives.
So, notwithstanding the facilitative approach promised by the Australian Securities and Investments Commission, planners must know they are best advised gearing their businesses to the reality of opt-in, fee disclosure and client best interests.
None of this appeared likely earlier this year when, having taken control of the financial services portfolio following the standing down of the Assistant Treasurer, Senator Arthur Sinodinos, the Minister for Finance, Senator Mathias Cormann, took the FOFA changes off the table in a bid to recalibrate a debate which was being controlled by the Opposition and the industry funds.
It is a measure of Cormann's ability and political acumen that he was able to introduce regulatory changes sufficient to achieve the Government's policy objectives and to have those regulations survive two disallowance attempts thanks to the support of the Palmer United Party(PUP) in the Senate.
Of course, all of that changed when Senator Jacquie Lambie deserted the PUP in acrimonious circumstances.
The lesson financial planners and their representative organisations should take from what happened to the Government's FOFA changes is that they must better control the political and media narrative around their industry.
The simple facts of the matter are that the financial planning industry was in 2014 out-campaigned by its critics to such an extent that it became conventional wisdom in both the electorate and the Parliament that the Government was seeking to water down a broad cross-section of the FOFA protections, including client best interests.
In reality, of course, the Government's changes did not entail any serious diminution of client best interest — something which was stated by the FPA, the AFA, the Financial Services Council (FSC) and, indeed, the patron of the Self-managed Superannuation Professionals Association and former High Court Judge, Sir Anthony Mason.
Notwithstanding the assessment of a distinguished jurist such as Mason, Industry Super Australia and a significant cohort of the daily media chose to repeat ad nauseam that the best interests duty was being watered down and in the absence of consistent counter-argument the claim resonated with the public.
Of course, the claims being made about the watering down of FOFA were also given impetus by the concurrent adverse media coverage of the financial planning industry based on the enforceable undertakings imposed on Commonwealth Financial Planning and Macquarie.
When the FPA, the AFA, the FSC and financial planners take the time to review how 2014 rolled out for their industry, they might care to reflect that they were the victims of a highly effective and professionally-run campaign by those seeking to thwart the Abbott Government's changes to FOFA.
It is a measure of the professionalism of those running the campaign that it was sustained for more than a year and that sympathetic journalists never found themselves short of a headline.
It is in these circumstances that the planning industry should accept that a major benefit of the Senate having disallowed the Government's FOFA changes is that they now have an opportunity to switch off the media spotlight and pursue their own strategies.
Sometimes it pays to be patient and play a long game.
Recommended for you
Join us for a special episode of Relative Return Unplugged as hosts Maja Garaca Djurdjevic and Keith Ford are joined by shadow financial services minister Luke Howarth to discuss the Coalition’s goals for financial advice.
In this special episode of Relative Return Unplugged, we are sharing a discussion between Momentum Media’s Steve Kuper, Major General (Ret’d) Marcus Thompson and AMP chief economist Shane Oliver on the latest economic data and what it means for Australia’s economy and national security.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford break down some of the legislation that passed during the government’s last-minute guillotine motion, including the measures to restructure the Reserve Bank into a two-board system.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford are joined by Money Management editor Laura Dew to dissect some of the submissions that industry stakeholders have made to the Senate’s Dixon Advisory inquiry.
