Innovations, government reviews, legislative changes and a degree of public conflict, far from undermining the contribution of professional financial planners, firmly underline the value for consumers of high quality financial planning advice, and the increasing demand for such advice.

Many issues have emerged in the regulatory and personal financial planning debate of late. Some of them seemingly represent a threat to the interests of financial planners and consumers alike, but all of them possess intrinsic opportunities for financial planners to improve the quality of play and level the playing field.

Financial services and credit reform

Financial planners have welcomed the Treasury’s Green Paper on Financial Services and Credit Reform, especially since its policy objectives will advance the interests of consumers, as well as bring a range of products and practices into a much tighter regulatory framework.

The Government’s ‘consumers’ are our ‘customers’. The Financial Planning Association (FPA) has strongly supported the key policy pillar on which the Green Paper is based, namely the adoption of uniform, national processes for credit related services. A staged implementation of the key ideas, in which mortgage regulation and finance broking is quickly brought under the auspices of the Federal Government, followed later by other forms of credit, will help to alleviate pressures within the system.

These pressures mitigate against consumers’ interests. They include the costliness, confusion and additional red tape that is associated with state-based regulation. A national system will create uniformity in terms of regulation, eliminate regional differences of interpretation and duplication and differences in training requirements.

Simple advice

In the FPA’s response to the Financial Services Working Group’s consultation on simple choices within an existing superannuation account, we pointed out the inadequacy of the scope of the consultation. Again, the cost and accessibility of advice for consumers is a critical issue, and we have put forward the general view that broader problems inherent in the Financial Services Reform regime need to be addressed, rather than simply those relating to intra fund advice.

We are convinced that improvements in this area need to be more ambitious. The FPA has made recommendations that are broad-ranging. See page 13 for more information on the FPA’s response to the Financial Services Working Group.

Tax Agent Services Bill

Proposed changes to the Tax Agent Services Bill have also required us to alert the Treasury to the fundamental flaws in proposals, which, if implemented, would exacerbate the difficulties experienced by consumers. The proposed changes could significantly restrict consumer access to financial planning advice on salary packaging, tax deductibility of super contributions, co-contribution eligibility and lump sum death benefit provisions.

Believing the proposed changes to be inconsistent with the Government’s deregulation policies, the FPA has argued that they undermine measures to improve the affordability of advice for consumers. Additional structural burdens, such as the requirement that financial planners would also have to undergo additional registration and training to become tax agents in order to provide basic tax advice will simply add to the already onerous regulatory burden and increase compliance costs – all of which would be borne by the consumer.

We can imagine the dismay of customers who might, as a result of the changes, need to consult with multiple professional advisors on connected aspects of their financial needs – and have to pay for each separate piece of advice!

Government review of fees and commissions

More recently, through the pages of a daily newspaper the Government announced a wide ranging yet unspecified review of fees and commissions. The Minister, in a recent speech, stated, “… superannuation fund product disclosure statements warn consumers that if total annual fees and charges represent 2 per cent of a fund members’ assets – rather than 1 per cent – this could reduce their superannuation savings by up to 20 per cent over 30 years. These fees reflect the range of business and remuneration models operating across the superannuation industry. And importantly, the fees charged to some fund members reflect commissions paid to the distributors of superannuation products. It’s high time we took a long, hard look at the operation, structure and cost of our superannuation industry.”

The key issue

In the midst of all of these serious issues, we hardly felt that it was helpful to face what appeared to be an ill-informed media onslaught against advice, fuelled at least in part by vested interests in the super industry, apparently intent on scaring consumers away from financial advice and into the arms of the product driven super schemes.

We have always argued that affordable advice is elusive for many Australians. In plain English: the cost of advice is too high. This is not because consumers are ripped off by financial planners, but arises mainly from red tape, compliance and other regulatory hindrances.

In the area of planner remuneration the issue is not simply one of ‘commissions versus fees’. Neither is it transparent billing – there is already compulsory separate disclosure to customers of ‘fees for advice’ versus ‘fees for products’. The key issue remains the structural costs that deny most Australians the opportunity to get quality financial advice on the issues they identify, at a price they can afford to pay.

For this reason the FPA enthusiastically embraces the potential reform opportunities that are currently in process.

Jo-Anne Bloch, Chief Executive Officer