Just days after he took control of the Future of Financial Advice amendments program, Senator Mathias Cormann has announced he will “press pause” on the regulations.
In a brief statement issued on 24 March, Senator Cormann confirmed he would take time to consult further with stakeholders on the FoFA regulations:
“Now that the legislation has been referred to the Senate Economics Committee and to enable the Government to consult in good faith with all relevant stakeholders on the Future of Financial Advice regulations, I have decided to pause implementation of these regulations during that consultation.”
Senator Cormann added that the Government remained committed to implementing the improvements to the FoFA legislation as soon as possible. “These election commitments are reflected in the legislation currently before the House of Representatives, which will continue through the normal parliamentary process.”
Senator Cormann was appointed Acting Assistant Treasurer on last week, after Senator Arthur Sinodinos elected to stand aside from his front-bench duties while involved in a NSW corruption inquiry (see: Sinodinos Stands Aside).
I am very happy to confirm that the government will continue to implement the policy commitments that we took to the last election
During Question Time in the Senate on the following day, Senator Mark Bishop asked Senator Cormann whether the Government would withdraw its FoFA changes, given that the Assistant Treasurer had stood aside.
Senator Cormann responded by first defending Senator Sinodinos: “Senator Sinodinos is a fine man of the highest integrity, who has been doing an outstanding job as the Assistant Treasurer. We all look forward to his return to the Assistant Treasurer position in due course.”
He then addressed the question as to whether the amendments would be withdrawn: “In the meantime, I am very happy to confirm that the government will continue to implement the policy commitments that we took to the last election. We know that is a novel concept for people on the Labor side, who go to an election and promise one thing but do the exact other thing after the election.”
Subsequently, during an interview with Sky News on Saturday 22 March, the Senator indicated that he would take some time to try to address some of the mis-truths about the amendments:
“There is a lot of mis-information out there, which is clearly creating concern among people like the National Seniors Association and COTA. What I will be doing in the next few days and weeks is I’ll make sure that everybody is very clear on what we’re actually proposing to do, rather than what Labor is dishonestly and inaccurately suggesting that we’re doing…
I’ll make sure that everybody is very clear on what we’re actually proposing to do
“The Labor Party is deliberately fudging things here. They are deliberately frightening people for political purposes. It is reckless and irresponsible. We will be setting out to ensure that people understand very clearly what we’re actually doing, as opposed to what Labor is telling people we’re doing.”
It is not clear whether the decision to pause the regulations process was made in direct response to the widely-reported criticism of the amendments, however, the Senator’s statement regarding the regulations did refer to an opinion piece featured in the Australian Financial Review in which Senator Cormann confirmed the Government was committed to the retention of the best interests duty and the ban on conflicted remuneration.
Responding to the Senator’s decision to pause the regulations, the Financial Planning Association (FPA) said the move was welcome.
“FPA applauds Finance Minister Matthias Cormann for taking further time to properly investigate changes that would otherwise have been introduced as regulatory reform this week,” FPA CEO, Mark Rantall, said.
“FPA fundamentally supports the original intent of the FoFA reforms based on sensible policy alignment, removal of unnecessary red tape and maintenance of consumer protection.
“We welcome the decision by Minister Cormann and look forward to continuing our constructive discussions to find practical solutions to these amendments.”
Mr Rantall also acknowledged the constructive working relationship the Association has with Minister Cormann: “We look forward to further productive dialogue with Government to get the balance right.”
Financial Services Council CEO, John Brogden, labelled the decision “prudent and sensible”.
The pause is timely and will allow the government and stakeholders to regroup
“There has been a lot of white noise and misinformation on what the proposed FoFA refinements mean for consumers,” Mr Brogden said.
“The pause is timely and will allow the government and stakeholders to regroup and make submissions to the Senate Committee on amendments which will allow FoFA to do what it was always intended to do. That is, to improve the quality and quantity of financial advice and to make it accessible for all Australians.”
Industry Super Australia also welcomed the announcement, saying the intervention of Senator Cormann was a timely circuit breaker and a victory for common sense.
“Gaining industry consensus on the regulation of financial advice will ultimately boost consumer confidence both in the financial advice sector and the superannuation sector,” ISA CEO, David Whitely, said.
“Industry super funds will engage constructively with the Government and industry to contribute to charting a new way forward.”
Let us hope that at the end of this pause, we have a system that is fair to consumers and gives them their right to accurate information, that will enable them to compare the quality of advice and product, so the cheap and nasty peddlers act ethically and in the best interest of the client.
In the real world, the only way this will happen, is by regulation with swift penalties for non compliance, as many organisations, either through ignorance or greed, will ignore plea’s of “Do the right thing” and cause untold damage to our communities, the retail life industry, advisers who do the right thing and of course our clients, who could be hoodwinked into cancelling quality Life policies by getting “General” advice 6 month benefit period Income protection policies, not realising they will lose their homes and assets if they suffer a long term illness or disability and their geheral advice policy stops paying them after 6 months.
I suspect that almost all advisers welcome the removal of sub clause (g) & Opt In.
What is causing issues is the sale of products under the guise of general advice by bank staff, not the banks planners.
A cheap & nasty range of risk products to claw back some of the fools who buy direct selling products in response to misleading saturation TPD ads.
Interesting to hear Alan Jones on “Richo & Jones” last night on Sky TV. Clearly Mr Jones is not a fan of the banks. Perhaps the FPA/AFA should talk to Mr Jones
I love a good laugh!
“Industry super funds will engage constructively with the Government and industry to contribute to charting a new way forward.”
Try telling the truth ISA!!!
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