Financial advisers hoping a change of government in 2013 will see them spared the full force of Future of Financial Advice (FoFA) reform are setting themselves up for disappointment, according to a legal view.
While the opposition has committed itself to amending and altering the reform package when it is debated in the Senate later this month, repealing FoFA, or even just the more contentious elements of the legislation, is unlikely to be a priority if the Liberal Party forms the next government.
According to Richard Batten, a partner at Sydney law firm Minter Ellison, the FoFA legislation should be in force by the time an election is held, making it difficult for a new government to significantly alter the landscape.
“Senator Cormann is very well attuned to the industry’s concerns… and the question becomes: ‘Will a Liberal-led government simply do the things in its recommendations?’ Or what will it do? My gut reaction is that they are unlikely to go straight for the legislation,” he says.
Batten believes a clear distinction must be made between what an opposition says it will do prior to legislation being passed and what the same party can do as a new government with the FoFA-reform package having been passed.
“I don’t think we can expect to see FoFA repealed. There is no doubt that both sides support the broad themes in FoFA and we are really just arguing points of detail rather than the general proposition,” he says.
“It is a guessing game, and I haven’t spoken to Senator Cormann on this point, but I would expect a short and sharp review of FoFA with an expert or an expert panel leading it.”
The Coalition has repeatedly promised that, if elected, it would fix what Senator Cormann calls “Labor’s FoFA mess”, claiming the reforms will increase red tape and costs for both business and consumers.
The significant changes it has promised include:
- The complete removal of opt in,
- The simplification and streamlining of the additional annual fee disclosure requirements,
- Improving the best-interest duty,
- Providing certainty around the provision and availability of scaled advice,
- Refining the ban of commissions on risk insurance inside superannuation.
