Sectional groups signpost FOFA changes

Recent reports suggesting that a group made up of industry funds, consumer groups and trade unions was ready to drop support for ‘opt-in’ if planners agreed to no longer charge asset-based fees must surely have worried the Federal Government because, if true, it suggested Government legislation could be shaped by those controlling a group representing highly sectional interests.

Amid all the lobbying and horse-trading taking place around translating the Government’s Future of Financial Advice (FOFA) changes into legislation, there came news reports last week suggesting a group made up of the industry funds, consumer groups and the Australian Council of Trade Unions (ACTU) was ready to drop support for ‘opt-in’ if planners agreed to no longer charge asset-based fees.

This report must surely have worried the Assistant Treasurer and Minister for Financial Services, Bill Shorten because, if true, it suggested Government legislation could be shaped by those controlling a group representing highly sectional interests.

There is, of course, always a good deal of horse-trading between groups making representations to Governments, but it would seem most inappropriate for any one of those groups to suggest that legislation can be shaped by a series of expedient trade-offs between interested parties. What the Government is proposing is either good policy or it is not, with the elected members of the Parliament being the ultimate arbiters.

Those observing who is indulging in the horse-trading around the FOFA changes might also reflect that some groups appear to be getting two bites of the cherry when it comes to stakeholder status within the Government’s broader consultative processes.

The Australian Financial Integrity Network, which is made up of industry funds, a consumer group and the ACTU, appears to have gained itself a seat at a table already populated by the Industry Super Network and the Australian Institute of Superannuation Trustees.

Observers might also note that broad-ranging discussion around the FOFA changes is taking place in parallel with a new debate about the default funds in the modern award process – something sparked by a controversy surrounding the performance and management of MTAA Super over the past three years.

Notwithstanding consistent urgings by the Federal Opposition that the status of modern award default funds needs (consistent with a Labor election promise) to be referred to the Productivity Commission, the Assistant Treasurer has signalled the matter is unlikely to be dealt with before next year.

So on the one hand, the Government is looking to impose significant change on one section of the financial services industry while, on the other, it is delaying having the Productivity Commission deal with an issue affecting the superannuation savings of millions of Australian workers covered by Federal Awards.

Just as the proposed FOFA changes have already served to alter the way in which many financial planners do business, any changes to default funds within modern awards would have an influence on inflows into particular industry funds.

Where the collapse of Storm Financial can be seen to have been the catalyst for changes to financial planning, the same might be argued with respect to the underperformance of default funds under modern awards. The Government has an obligation to act.