The Normal Person’s Guide to FoFA & FSI

Australia’s Future of Financial Advice (FoFA) reforms process has had more twists than an alpine road.

Hairpin bends involving almost 360 degree changes, plenty of bumps and some scary drops – all while slowly winding up the ascent towards … Nirvana?

Not quite.

Add to that the Financial System Inquiry (FSI) Interim report released yesterday and you’d be forgiven for suffering a double dose of regulatory altitude sickness.

So what’s the cure? Well if you’re a normal financial services executive, and not a policy guru or mountain goat (I’m not), the best solution is to get off the mountain.

Failing that (for us, turning back down the mountain isn’t an option) here’s how to catch up on the last decade’s financial reform processes.

FoFA now

Whether you think Senator Cormann was forced to read a Palmer United Party (PUP) script or not, you probably noticed that the Future of Financial Advice laws (first introduced by Labor and then revised by the Coalition) were the subject of considerable political back and forth this week. Ultimately, however, the laws in their current form remain effective from 1 July this year with amendments from PUP. Within 90 days regulations will be enacted that put into effect the PUP changes.

So it’s over. For now.

Treasury’s official FoFA page is good for history, and has links to current legislation drafts.

FSI

What’s not over is the Financial Systems Inquiry. With an interim report released yesterday a few key super and financial advice highlights are:

• Super may be restricted further in terms of gearing and come under pressure to drop fees further – so we can all save more for retirement.
• Variable quality of financial advice remains a major consumer risk – so improved education for advisers (and other measures) is important.
• “General advice” that leads to a product sale (e.g. from a bank staffer) should perhaps be called ‘sales’ or ‘product information’.
• There may end up being one “super super” default fund which asset managers then bid for in its entirety.

The full Interim FSI report can be found here. Thank goodness it’s hyperlinked otherwise finding what you need in the 430-odd page (sans hyperlinks) PDF is painful. The overview is helpful, particularly for the list of major developments since the original “Wallis” financial system inquiry report. For the cheat’s guide I’d head straight to the Themes and major issues section.

The last five years

The Financial Services Council (FSC) kindly put together something we were about to draft ourselves – a timeline of inquiries into Financial Services. Starting in 2009 this is a good summary of the maze-like political processes the industry has navigated.