“What I will be doing in the next few days and weeks is... make sure that everybody is very clear on what we’re actually proposing to do,” the new mouthpiece of FoFA has announced during a very uncertain and turbulent time for the Streamlining Future of Financial Advice Bill 2014.
In an interview with Sky News
on Saturday, finance minister and newly-appointed FoFA guardian Senator Mathias Cormann defended the Bill.
A few days later, and he has just announced that he’s hit pause on the process, shelving plans to table the regulations this week. The announcement adds an undisclosed but presumably extremely lengthy time frame to the already drawn-out process.
Cormann inherited the arduous job of fronting the bill a week ago after his predecessor, Assistant Treasurer Senator Arthur Sinodinos, was forced to stand down amid media furore surrounding his role in a major corruption
“I do not want this side-show to be an unnecessary distraction to the important work of the government, which I’m proud to serve,” Sinodinos told Parliament during his resignation announcement.
But it has left Cormann with a side-show of his own to deal with, and many in the industry have predicted
that individuals and organisations will take his new appointment as an opportunity for further lobbying and pressure.
Born in Belgium, the now-finance minister migrated to Australia permanently after his first visit to Perth in 1994. His Parliamentary biography says he was attracted by the great lifestyle and opportunities on offer in Western Australia.
Upon arrival, Cormann’s Belgian law degree wasn’t recognised in Australia, so he got by doing gardening work before joining the WA Liberal party in 1996, ABC
He was subsequently elected as senior vice president of the Perth division in 2000, state vice president in 2003 and state senior vice president in 2004.
Cormann, who holds a private pilot’s license, has represented the State of Western Australia in senate since June 2007.
He knows how to pack a punch and has been an outspoken critic of the Labor Government’s FoFA reforms since the beginning.
In March 2012 he released a press release promising that the coalition would “fix Labor’s mess” if elected. He called the Government’s handling of the legislation “rushed, inept, and chaotic” and claimed it would reduce choice, diversity and competition.
His interview with Sky News
was equally hot, and he was quick to accuse the opposition of scaremongering and fact-fudging to push vested interests.
“There can be no suggestion that somebody who walks into a bank and talks to a bank teller about the bank’s products is somehow in a similar level of risk as when you talk to a Storm Financial about investing your entire retirement savings in something that is completely inappropriate to your circumstances,” he insisted. “The Labor Party is deliberately fudging things here. They are deliberately frightening people for political purposes. It is reckless and irresponsible.”
And true to his word that he will personally make sure “everybody is very clear” on the FoFA reforms, Cormann has just written a column in Australian Financial Review
in an attempt to correct what he labels misinformation, some of it “deliberate and mischievous”.
He used the column to address two of the main FoFA amendments where most debate has centred: Best interest duty, and conflicted remuneration.
Contrary to the beliefs of some vocal groups, the proposed removal of the seventh step or “catch all” provision of best interests duty will give advisers more certainty – not less – about what their obligations are, Cormann wrote, adding that the final step as it is adds no benefits.
Complying with the other six steps is sufficient to ensure that an adviser acts in the best interests of their client, he said. “Compliance with all these requirements would have protected people from a Storm Financial situation”.
Cormann also stressed that the coalition is not reintroducing sales commissions or conflicted remuneration for personal advice, or adviser sales commissions for general advice.
“The problem with Labor’s FoFA here is that non-industry fund financial product providers are effectively barred from incentivising their employees to provide general product advice about their own products. That is ridiculous,” he wrote. “The restriction on non-industry fund financial product providers has further entrenched a market distortion, caused by Bill Shorten’s special deal for industry super funds. He allowed them to charge every super fund member an undisclosed amount for so called intra-fund advice, general or limited personal advice, irrespective of whether or not the fund member has received any such advice.”
And although Assistant Treasurer Sinodinos has been - until now - the coalition’s face of unwinding the FoFA laws, Cormann was in fact very much one of the main architects behind the amendments.
His return to the policy changes has been welcomed by some of the biggest financial associations including the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA), as reported in Australian Financial Review
But now that he’s announced his decision to freeze the regulations to allow time to consult with more stakeholders,
it looks like Cormann still has a wee way to walk in his new shoes.
Until then, he’s sticking around.
“Let’s be very clear though, the Treasurer and I, together with the Prime Minister and all of the ministers in the cabinet have been working for some time on the task of repairing the Budget mess we have inherited from our predecessors,” he told Sky News
. “We’re obviously getting closer and closer to the Budget now. Everything is just business as usual.”