1. Tax deductibility of advice

Will the Federal Government move to make all forms of financial advice tax deductible?

That was one of the biggest questions being posed as the industry awaited the outcome of the Henry Review of taxation in circumstances where there has been unanimity across all sections of the financial services industry about the benefits that would flow from giving tax-advantaged status to the provision of advice.

The push to make advice tax deductible received a boost when it was included in the recommendations of the Parliamentary Joint Committee on Corporations and Financial Services (Ripoll Inquiry).

The committee’s final report said the “proposal to make the cost of financial advice tax deductible for consumers has merit”.

“It could potentially encourage more people to seek financial advice and would match the deductibility presently afforded to manufacturers paying commissions to advisory firms,” it said.

The tax deductibility of advice has been high on the agenda of the Financial Planning Association (FPA), the Investment and Financial Services Association (IFSA) and the Association of Financial Advisers (AFA) for most of the past half-decade.

While the Henry Review appeared only lukewarm on the issue of making advice tax deductible, the ultimate decision is expected to be dependent on the Government’s analysis of how it will affect the Budget bottom line moving into 2010-11 and beyond.

2. Fees and commissions

Much was expected from the Ripoll Inquiry but, ultimately, little was delivered on the debate that has focused the attention of the financial services industry for most of the past five years.

While acknowledging the need to end the linkages and therefore conflict between product sales and advice, the Ripoll Inquiry ultimately stopped short of recommending specific action on the part of the Government and instead pointed to the existing processes initiated by the industry.

The industry initiatives have mainly centred around the FPA’s policy for the phasing out of commission structures and IFSA’s member charter.

However, it is worth noting that neither the FPA position nor that of IFSA has been sufficient to mollify the industry superannuation funds, which are continuing to call for specific action on the part of the Commonwealth to eliminate commission-based remuneration.

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, has signalled there is likely to be little movement before the Cooper Review into superannuation reports in mid-2010.

3. National consumer credit regulation

Though only on the periphery of the radar for most financial planners in 2009, the Commonwealth’s move to finally assume control of consumer credit has long-term implications for the broader financial services industry.

The fact that consumer credit had remained within state jurisdiction meant large holes existed in the Australian Financial Services Reform Act, with operatives such as mortgage brokers being able to operate within a less onerous regulatory environment than financial planners.

The passage in October of the National Consumer Credit Protection Bill has created a more uniform regulatory environment, albeit that it has also created some further challenges for planning practices.

4. Lifting of the superannuation guarantee beyond 9 per cent

Despite virtually every piece of research conducted in 2009 suggesting widespread industry and public support for increasing the compulsory superannuation guarantee (SG) beyond its existing 9 per cent, the Government continues to exhibit reluctance.

While the Cooper Review into superannuation is continuing and may yet recommend a lift in the SG, the Henry Tax Review has recommended against such a move.

In the absence of the Government moving to lift the superannuation guarantee, the most logical option remains so-called ‘soft compulsion’, wherein superannuation fund members are encouraged to voluntarily apportion any pay rise to super.

5. Tougher financial services regulation

While Australia emerged comparatively unscathed from the global financial crisis, the collapse of Storm Financial and events overseas suggest the financial services industry will need to endure some tightening of the legislative and regulatory environment.

While the chairmen of ASIC and APRA, Tony D’Aloisio and John Laker, have acknowledged that Australia’s twin peaks regulatory system held up well, they have pointed to a likely global tightening in the regulatory environment.

The bottom line appears to be that as good as Australia’s system has proved to be, some tightening will occur consistent with events overseas.