Last night a motion disallowing the government’s bill amending FOFA passed through the Senate, having been knocked back by the upper house on two separate occasions in previous parliamentary sittings this year.
The motion passed by 33 votes to 31, following the controversial last minute support of Palmer United Party Senator Jacqui Lambie and Motoring Enthusiast Party Senator Ricky Muir, both of whom had previously voted in favour of the government’s changes.
Rising to explain her decision, Senator Lambie apologised to her electorate for her earlier support of the FOFA amendments, vowing to vote only in the “public interest” from now on.
However, a number of stakeholders have rejected the notion that the disallowance will have benefits for Australian consumers, not least the bill’s chief advocate Mathias Cormann.
“By disallowing our FOFA improvements the Senate tonight voted to increase the cost of financial advice and to lessen competition across the financial advice industry without improving consumer protections for Australians saving for their retirement,” Senator Cormann said in a statement following the vote.
The comments followed earlier remarks from Senator Eric Abetz, who suggested the sudden change would “devastate” the financial services industry, adding that the sector is Australia's "largest employer".
The lobby groups representing financial advisers were also adamant that the public interest has not been upheld by this decision, as well as pointing out the dire situation for the industry.
“This will have a catastrophic effect across the entirety of the financial services industry, one of the largest employers of people in Australia,” said FPA chief executive Mark Rantall.
“If passed, this disallowance motion will continue five years of uncertainty for financial planners and their clients which commenced when the FOFA process began under the Labor government.”
The AFA also issued a statement, voicing concern over the implications for the grandfathering provisions in the regulations proposed by the government.
“We have particular concern over the blocking of amendments that resolve the issue of grandfathering,” said AFA chief executive Brad Fox in a statement.
“This will need to be reconsidered as this problem from the initial FOFA legislation has removed competition from the financial advice market to the detriment and concern of financial advice clients and their advisers.
“Both the Government and Opposition have previously acknowledged that the grandfathering problem needs to be fixed and we will be diligent in ensuring a resolution is found.”
Meanwhile, the FSC said an unamended FOFA would create a “legal quagmire” and “havoc” in the financial services industry.
“Overturning the FOFA regulations at the eleventh hour will do more harm than good,” said FSC chief executive John Brogden.
Meanwhile, ASIC has clarified it will take a “practical and measured approach to administering the law as it now stands”, with a transition period of up to 1 July 2015 in place.