The Future of Financial Advice (FoFA) reforms have brought about significant debate within the financial planning community. The government argues that its reforms are needed to regulate an industry that has been damaged by a few greedy cowboys and collapses such as Westpoint and Opes Prime. On the other hand, the financial planning industry says the reforms will increase costs and red tape, drive clients away and make it harder to do business.
The government and Bill Shorten in particular have to walk a fine line, and in this case over-regulation is a real danger. The government sometimes has to step in curb the excesses that a few are inclined towards, but the danger in this is heavy-handed legislation that makes life unnecessarily difficult for the genuine and honest majority of financial planners.
In an interview for No More Practice 2, Shorten recently said that there is a degree of public discomfort with the financial planning community. He said that four out of five people aren’t using financial planners and affirmed that “the current model isn’t working”.
But it’s a bit of a stretch to claim that reform is needed because most people aren’t using financial planners, either because of the failings of the current model or because people distrust financial planners. There are many reasons people don’t use financial planners, and I think Shorten’s reasons would be pretty low on the list of most people.
Sadly, governments are often inclined to introduce broad, sweeping legislative change that turns industries upside down (think carbon tax) when a selective scalpel approach will do the job much more effectively and efficiently. But that would be too simple, wouldn’t it?
