Why the FOFA infighting needs to end

Despite lingering misgivings about the manner in which some workable changes were achieved to the Government’s Future of Financial Advice bills, the financial planning industry will unite sufficiently to ensure their appropriate implementation.

That was the bottom line of a Money Management roundtable held on March 26 Monday in the immediate aftermath of the House of Representatives’ passing of the FOFA bills, as the dust settled on the minor furore which accompanied the leaking of documents suggesting the Financial Planning Association (FPA) had reached an accommodation with the Industry Super Network (ISN).

That roundtable involved FPA chief executive Mark Rantall, Association of Financial Advisers (AFA) chief executive Richard Klipin, Premium Wealth Adviser managing director Paul Harding-Davis and Mercer's Jo-Anne Bloch.

The mood of the industry seemed to be indicated by Klipin, who described the evolution of FOFA and the events of the prior week as having “played out like a soap opera”.

“Last week was a pretty huge week and from Monday to Thursday the way it played out was in many ways a bit of a soap opera, and it looked like in certain components the Government had listened to the industry and then it chopped and changed,” he said.

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“But in hindsight with respect to last week, we’re done and dusted and after three long years FOFA is now a reality, and good advisers who have adapted will be well placed to take advantage of it,” Klipin said.

However, the AFA said there was a sense of disappointment within the AFA community because the Government had been found wanting with respect to both the outcome of the legislation and the processes themselves.

The FPA’s Mark Rantall was making no bones about the fact he believed the industry had achieved some wins in the FOFA process, while there remained things about which it was still not happy.

However he claimed that while the FPA had never supported opt-in, he believed a point had been reached which made it more acceptable.

“We don’t support opt-in, we never supported opt-in, but where we got to on opt-in, as it rests in the legislation, is that through the signing up to the professional code of conduct that is approved by the Australian Securities and Investments Commission (ASIC), members of that code should not have to comply with the opt-in legislation as it stands – they will have relief from ASIC,” Rantall said.

“We would have much rather opt-in had been removed, that would have been cleaner, but where it stands at the moment we may be in the position where no FPA member has to sign an opt-in certificate. That is a reasonable win,” he said.

However Rantall said that when the opt-in arrangement was taken together with the Government’s undertaking to legislatively enshrine the term “financial planner” or “adviser”, it represented “enormous advancement for the profession”.

“We’ve got a chance now to take financial planning, which is in the national interest, into a respected profession, and that has always been our objective,” he said.

Reflecting the pragmatic view of many in the industry, Mercer’s Jo-Anne Bloch said her overwhelming plea to the industry was to come together to support the FOFA changes.

“Anyone who thought such a significant piece of reform was going to go through with their particular interest in mind, without significant change, was really on the wrong page,” she said.

Bloch said that while not everything in the legislation was perfect, the main tenets with respect to best interests duty and the ban on conflicted remuneration deserved the support of all the major stakeholders.

Premium Wealth Advisers managing director Paul Harding-Davis echoed Bloch’s sentiments, saying the reality was that the industry needed to recognise what had happened and to get on with the job of looking after clients.

However, he warned that much needed to be clarified in a regulatory sense around fee disclosure and other matters.

“The sooner that comes out, the sooner we can get on with it,” he said.

What also became very clear from the roundtable was an expectation that ASIC would get on with the task at hand, rather than raising issues such as the appropriateness of asset-based fees, with all roundtable participants agreeing that the type of fees charged were a matter between planners and their clients.

As well, there was general agreement that with the FOFA changes having been thrashed out and with the apparent involvement of the Industry Super Network, it would be inappropriate for the ISN to continue any of its advertising undermining the role financial planners or the value of advice.

Klipin said he believed the ISN advertising campaign had ultimately proved damaging to the entire financial services industry, but acknowledged that on many of the debate issues surrounding FOFA the ISN had proved a winner.

“The ISN have absolutely driven this debate and they’ve absolutely won out of this debate, and if you look at it in political terms they’ve come out and succeeded in wedging the industry, which is unfortunate,” he said.

Klipin said it was now time for ISN and the other parties to put down the swords and for the industry to come together to talk about the things it has in common.

“In our view the pendulum has swung too far over and we’ve just come out of a weekend where the politics has manifestly changed the Queensland landscape and perhaps the national landscape,” he said. “But what you don’t want to have is that every time a governing party changes there is a sense of retribution.”

Klipin said it was on this basis he wanted to call on the ISN to join the entire marketplace rather than playing wedge politics, and that included getting their own backyard in order – “clear, transparent and unbundled”.

Rantall said it was time for all participants to lift the debate and to act as an entire industry.

“It is critical for all participants to sponsor the industry,” he said, “...there is no room in that to have divisive advertising or strategies at all”.