Pausing FOFA changes a win for pragmatism
It would have proved very easy to have read the announcement by the Minister for Finance, Senator Mathias Cormann, that he was pausing the Future of Financial Advice (FOFA) legislative change process as some sort of a victory for Industry Super Australia (ISA) and those others who have been opposing the Government’s moves.
But to have done so would have been to ignore the political realities and the manner in which Cormann, the substantial author of the Government’s FOFA agenda, needed to regain control of the messaging and the tempo of the debate.
Simply put, the relatively simple messages the Government had originally sought to convey around adjusting and clarifying elements of FOFA – such as with regard to client best interest – had become lost in translation thanks to the cleverly-targeted and carefully nuanced messages delivered by ISA and accepted and backed by some key media commentators.
There were very few positives to be drawn by the Government from the standing down of the Assistant Treasurer, Senator Arthur Sinodinos, but one positive was that it acted as a circuit-breaker with respect to the FOFA debate and an opportunity for Cormann to reassert control over the legislation of which he was the substantial author.
What Cormann immediately knew upon picking up responsibility for the financial services portfolio in the absence of Sinodinos was that the legislation had been sent off to a Parliamentary Committee for review and that, in any case, it was unlikely that the core legislative changes would make their way through a Senate which remained under the control of Labor and the Greens.
What he also knew was that there were elements of the legislative changes which were not entirely to the liking of groups such as the Financial Planning Association, not least because they gave rise to perceptions that a loophole was being created with respect to commissions-based remuneration.
That is why the first thing that should have been noted within Cormann’s announcement was the declaration that while the Government was prepared to consult with the various stakeholders, it remained committed to its originally-stated legislative objectives.
Commentators might also have taken the time to read a carefully-worded column penned by Cormann in the Australian Financial Review which restated the degree to which he believed the FOFA legislation introduced by the former Financial Minister and now Federal Opposition leader, Bill Shorten, had been over-engineered and unduly influenced by Labor’s constituency within the industry funds movement.
So the reality for financial planners and others closely watching Cormann’s “pause” is that it is an exercise in pragmatism reflecting the reality that nothing concrete was likely to occur given the current make-up of the Senate and in circumstances where the underlying message had been hijacked.
Those who have dealt with Cormann know that he is nothing if not highly determined and an astute tactician.
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