Despite grumbling by the usual suspects, the Abbott government’s proposed FOFA amendments will benefit advisers and consumers alike.
For those who follow financial services public policy closely, the announcement came as no surprise.
Ever since the Ripoll inquiry was first initiated, the Coalition’s qualms with Labor’s financial advice reform agenda have been consistent, vocalised both by former portfolio spokesperson Mathias Cormann and his successor Arthur Sinodinos.
Having already outlined a timetable for reform, Senator Sinodinos’s 20 December announcement of the FOFA amendments was more a formalisation of what the government had already committed itself to, rather than a new ‘announceable’. But this did not diminish the subsequent celebration.
Within minutes of the news story hitting inboxes shortly after 7am, ifa received a flood of phone calls, text messages and online comments heralding the beginning of a more favourable regulatory environment.
Understandably, the industry’s lobbyists were among those popping the champagne.
“What a lovely Christmas present,” AIOFP executive director Peter Johnston told ifa, while AFA chief executive Brad Fox summised that 2013 had ended on a “positive note” and the FPA's Mark Rantall said the changes would assist the move to professionalism. Major instos BT and AMP also issued press statements welcoming the move.
And yet – equally unsurprisingly – the supporters and architects of FOFA in its current form were quick to rain on the parade. Right on cue, ISA boss David Whiteley offered his two cents, pushing for a deferment of the changes and calling on the government to stick to the “sensible centre”.
Further up the political chain, shadow treasurer Chris Bowen and shadow financial services minister Bernie Ripoll released a joint statement lamenting the proposed changes, claiming the move was “bad news for investors”.
Mr Bowen went a step further on Twitter, claiming the amendments would make “another Storm, Westpoint or Trio collapse more likely”, while fellow ALP caucus member Stephen Jones MP, whose electorate is home to a number of Trio Capital victims, said he was “deeply concerned the Abbott government plans to axe [FOFA]" in a submission to ASIC.
While it is understandable that the Opposition is seeking to safeguard its record and resist the change, the idea that this package of amendments will “axe” FOFA is inaccurate and seemingly a deliberate attempt to scare clients and consumers.
This perception has not been helped by mainstream media reports, such as an Australian Financial Review editorial which claimed the amendments seek to “overturn virtually all of the former Labor government’s reforms to the financial planning industry”.
As with a majority of financial advisers that the publication speaks to, ifa supports FOFA’s fundamental premise of doing away with product conflicts and championing a fee-for-service mentality.
The package Mr Sinodinos will put to Cabinet, and ultimately to the parliament, does not “overturn” or “axe” FOFA but make sensible changes that have broad support across the entire financial planning spectrum.
The eradication of the opt-in requirement, for example, will reduce an unnecessary burden that may have left vulnerable clients without access to advice when they most need it; while the removal of the ‘catch all’ provisions and greater certainty around fee disclosure will have transparency benefits for advisers and their clients.
Moreover, the Coalition’s package actually goes further on a number of consumer protection fronts than the original FOFA.
The amendment to the ban on volume-based shelf-space fees will see emphasised conflicted remuneration bans for fund managers, for instance, while the additional scaled advice guidance may make providing advice to lower-income clients more feasible.
Meanwhile, it was Arthur Sinodinos – not Chris Bowen or Bernie Ripoll – who, in a recent interview with ifa, revealed vertical integration was on the regulatory agenda, this being a topic little discussed by the former government.
Let’s just hope Clive Palmer can see through the spin.
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