Taskforce to keep FoFA in white knight’s sights

Financial advisers who hope a change of government will see the pending Future of Financial Advice (FoFA) reforms watered down may have an unlikely ally.

While Senator Mathias Cormann has repeatedly presented himself as a white knight prepared to battle the government’s compliance dragon, his Liberal Party colleague Senator Arthur Sinodinos will soon champion the deregulation cause.

Federal opposition leader Tony Abbott appointed Sinodinos to head a coalition taskforce in December last year, which will look into ways of reducing bureaucratic red tape for business.

The Liberal Party would like to go into the next election – possibly in the latter half of 2013 – promising to cut a billion dollars in unnecessary compliance costs.

To achieve this the taskforce is in the process of consulting business in finding examples of intrusive, expensive and burdensome regulations.

And that’s where FoFA comes in.

It’s not the Carbon Tax

While the opposition has committed itself to amending and altering the reform package from the beginning, it is has been widely speculated as to how much of a priority it would be should the Liberal Party form the next government.

“The salvation for those who continue to oppose opt in is that soon after the FoFA Bill was passed through the House of Representatives, the coalition undertook to repeal it, or at least parts of it,” says industry commentator Robert MC Brown.

“Assuming that they get the chance, it will be interesting to see whether this is a ‘core promise’ or a ‘non-core promise’.

“That distinction will be bitterly familiar to anyone involved in the battle over the previous government’s unworkable superannuation surcharge.

“Would a coalition government call a double dissolution over FoFA? It’s not exactly the carbon tax, is it?”

No ifs, no buts for opt-in removal

Certainly Senator Cormann was eager to reassure members of the Association of Financial Advisers (AFA) that the coalition, if it forms government, will fix FoFA by implementing all of the 16 recommendations it made as part of the Parliamentary Joint Committee inquiry into the legislation.

Speaking at an AFA lunch on Friday (March 25), he reiterated the opposition view that the reforms will increase red tape and costs for both business and consumers, while reducing choice, competition and diversity across the financial services industry.

“The problem with FoFA is that the bad bits are really bad,” he said, adding that the 16 recommendations would be part of formal coalition policy going into the next election.

“This includes a commitment to removing opt in – no ifs, no buts – we will remove opt in.”

Aside from the complete removal of opt in, the opposition has promised 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; and refining the ban of commissions on risk insurance inside superannuation.

However it may ultimately be the cost of implementing FoFA and the resulting job losses that keeps the reform near the top of the agenda if the coalition forms government and controls the senate.

The opposition estimates that it will cost about $700 million to implement FoFA and a further $350 million per annum to comply with the reforms.

Senator Arthur Sinodinos believes the government has lost perspective in trying to police the industry with what he called Draconian reform.

“They (the government) try to convince people that the amount of paperwork equates to the severity of what they’re doing,” he said.

“Andrew Robb as head of our policy committee puts this quite well when he says when we don’t want to derogate the standards that the industry should meet, but we want to reduce the cost of meeting those standards. We want a culture of personal responsibility.”

The taskforce is due to report its findings by July 1, 2012.