The financial planning community remains confident it can reach a timely, satisfactory outcome on the government’s FoFA reforms, despite the pause announced this week by Finance Minister and acting Assistant Treasurer Mathias Cormann.
“We’ll be able to find a landing spot on this, as long as there are not embedded product commissions,” says Matthew Rowe, chair of the Financial Planning Association of Australia (FPA).
“We are quietly confident that what the minister has done has given everyone time for some breathing space, and time to work through and reach a consensus position.”
The broadly held view is that the latest round of reforms – focused on general advice commissions and the best interests duty provisions – will be finalised by the time the Senate Economics Legislation Committee meets on June 16.
However, there are still concerns around the urgency.
“There are some real pressure points for financial planners within their own businesses and for the financial planning community as whole. Four years of uncertainty is not helping anyone,” Rowe says.
Rowe believes the major issue is around grandfathering, and that “at the moment it’s very difficult to enter into an agreement to sell or buy a financial planning practice”.
“That needs to be an immediate priority, [Cormann] understands that,” Rowe says.
“But that date is only three months away, which is not a lot of time. We’re encouraging the minister to deal with these things as a priority.”
Rowe’s comments echo concerns voiced on Monday by Bernie Ripoll, Shadow Minister for Financial Services.
“My concern is they’ll do a bit of listening but there’ll be no change…this is a massive step backwards,” Ripoll said, during an interview on ABC’s The Business.
“We sent a message that the culture was changing [in the financial services industry] and I believe this is undermining that.”
“The sector wants to professionalise, but I question how seriously the government is taking the sector [in that regard].”
Ripoll also referred to the banking sector, saying they had been “lobbying very strongly in support of the reforms”.
Steve Munchenberg, chief executive officer of the Australian Bankers Association, emphasises his hope that general advice remains unaffected by the reforms.
“We don’t want [general advice] caught up in the whole FoFA regime,” he says.
“There appears to still be a lot of confusion about the difference between general advice and personal advice. We want to make it clear that banks can still provide general advice.”
Asked specifically which items the government needs to address in its latest round of industry consultation, Rowe says: “I think they’ll be looking at seeking advice and feedback around best interest and making sure that stakeholders are aligned behind this issue.”
“Our position is that we support the government’s changes to best interests duty,” he says.
The industry reacts
Read a round-up of reaction to the government’s delay to FoFA reforms
ICAA: pause on FoFA a wise move
Chan & Naylor welcomes FoFA reform pause decision
FSC: Pause to FoFA changes prudent and sensible
FoFA regulatory freeze welcomed by advice profession
Note: This article was amended on 26/03/14 to correct the title of the Senate Economics Legislation Committee.
