Who dares wins in FOFA lobbying games

Assistant Treasurer, Bill Shorten, has pointedly excluded the Association of Financial Advisers from those who convinced the Government to concede ground on risk commissions in superannuation but, as Mike Taylor writes, lobbying games are not quite so simple.

What works best in lobbying Governments? A carrot or a stick? 

If the words of the Assistant Treasurer and Minister for Financial Services, Bill Shorten, are to be taken as a measure, then he responds more to blandishments than barbs.

In an address to the Financial Services Council (FSC) annual conference on the Gold Coast earlier this month, Shorten offered an olive branch by indicating the Government would be revisiting its proposed ban on risk commissions in superannuation and would, very likely, allow commissions to be applied to individually-advised risk products.

In doing so, the minister attributed his amenability on the issue to the efforts of the FSC and the Financial Planning Association (FPA), and not to the efforts “of another planning organisation”.

All those listening to Shorten’s speech promptly came to the conclusion that the “planning organisation” in question was the Association of Financial Advisers – the industry group which had been most publicly strident in opposing not only the blanket ban on risk commissions in superannuation, but also the Government’s Future of Financial Advice (FOFA) proposal for a two-year opt-in.

Indeed, any reading of the pages of Money Management over the past three months will reveal that while the FSC and the FPA had publicly and very clearly declared their opposition to the two-year opt in and the ban on risk commissions in super, it was the AFA which was persistently making the headlines by denouncing the Government’s approach and exhorting planners to lobby individual members of parliament.

The FPA had also encouraged its members to lobby their Parliamentarians on the FOFA issues but, otherwise, its approach was far more circumspect. It was obvious that FPA chief executive, Mark Rantall, was focused on lobbying as a key route to achieving the much-needed concessions.

It was therefore hardly surprising that, in the wake of Shorten’s announcement to the FSC conference, Rantall laid claim to a large part of the credit for having extracted what represents a key concession from the Government on risk in super.

AFA chief executive, Richard Klipin was also at the FSC conference and, having heard the minister’s remarks, was making no apologies for his organisation’s approach, perhaps on the basis that, notwithstanding the minister’s remarks, many of his members attributed the breakthrough to the AFA’s comparatively hard-line approach.

Sensibly, the minister’s concession was probably owed to both the measured approach adopted by the FPA and the FSC as well as the hard-line approach of the AFA.

Then, too, there were the cynics in the industry who suggested that Shorten, a former national secretary of the Australian Workers’ Union, had utilised one of the oldest union negotiating tactics of taking away something precious to the industry so that he could give a part of it back.

Whatever Shorten’s motivations may have been, he has left absolutely no doubt in anyone’s minds that the Government is determined to enshrine a two-year opt-in requirement into the legislation that finally emanates out of the FOFA changes.

That legislation is now not expected until early next month, a time-table which suggests that Parliament may be heading for its 2012 winter recess before the legislation has seen debate in both the House of Representatives and the Senate.

And it will most certainly be the House of Representatives where the most animated debate will occur, particularly around opt-in with both Shadow Treasurer, Joe Hockey and the Opposition spokesman on Financial Services, Senator Mathias Cormann, reiterating in the past two weeks that the Coalition will not be supporting the FOFA legislation in its current form.

NSW independent, Rob Oakshott, is also reported to have indicated he has concerns about the proposed legislation. Tasmanian independent, Andrew Wilkie, is also understood to have some issues that he wants to see addressed.

Although Shorten has indicated the Government might be prepared to allow commissions to remain on individually-advised risk products, many in the financial services industry are reserving judgement until they see the Government’s formal position enshrined in the draft legislation.

For the AFA, the fact that Shorten is a junior minister (outside of Cabinet) in a minority Government means that it has less to fear than did the Housing Industry Association, which was harshly critical of a Federal Labor Government back in the late 1980s.

When Labor was returned to office at the subsequent Federal Election, HIA officials found themselves getting less access to ministers than those representing competitor organisations, such as the Master Builders Association.

Given the state of the polls, the finely-balanced Parliament and the time-table for the next federal election, the AFA seems to have little to fear from using barbs rather than blandishments.