The Year Ahead

As 2001 rolls over on desk calendars issues concerning the financial planning fraternity begin to surface. Kate Kachor looks at the big issues facing planners this year.

They were words spoken with forthright and confidence. Words sprinkled with Christmas cheer and words Ken Breakspear believed to be true - “Santa will have it in the bag.”

Late December last year, Breakspear, chief executive of the Financial Planning Association (FPA) spoke openly withMoney Management, saying it would be only a matter of days before the Government and the FPA agreed on a solution to the issue of Alienation of Personal Services Income.

It is more than a month later and Breakspear is still waiting. Despite the backwards and forwards steps Breakspear has been made to dance, he is hardly discouraged.

"We are pleased with the degree of support from our members, with many of them writing to Parliament," he says.

"As for the outcomes, we have to wait for their [Parliament's] response."

Breakspear, who was appointed FPA chief in October last year, has set himself a task in 2001 - to hit the issues facing his association head on.

Although Breakspear believes the big issues today are similar to those 12 months ago, he has pinpointed the top five concerns facing the financial planning industry for 2001.

Heading his list is the delays in the implementation of the Financial Services Reform Bill (FSRB). Following FSRB concerns are the issues of Alienation of Personal Services Income, adviser licensing, IPS 146 and adviser education.

"What concerns me most is the future of the FSRB. If that legislative stand off is not settled, all the work that has been done to date has been wasted," he says.

"It's a bad outcome for the industry if we have to go back to the Commonwealth releasing its own legislation, it will cost us another year or more."

Breakspear says the go-ahead of FSRB needs to be recognised as it is the core issue stalling any further FPA initiatives.

He says the delay in releasing the reforms has slowed the government's and Australian Tax Office's (ATO) decision to resolve issues of licensing and Alienation of Personal Services Income.

According to an FPA statement issued last year, the ATO's position: "remains that financial planners who hold a proper authority (PA) and operate through a corporate structure need to declare any income earned from holding the PA as personal services income."

Breakspear and the FPA disagree. Breakspear says the Government should provide the industry with a 12-month moratorium from the new alienation laws so they coincide with the introduction of the Financial Services Reform Bill.

One financial planner who agrees with Breakspear and the FPA's position is Moneyplan director Peter Dunn.

Dunn, the sole director and owner of Melbourne-based Moneyplan, and recipient of Money Mangement's Financial Planner of the Year award in 1999, says the issue of FSRB and IPS 146 is also high on his list of 2001 industry concerns.

"There hasn't been enough homework done. Not enough thought and assessment processes which leaves us all saying: 'its bloody hard to figure out what we need to do'."

Dunn, who has been involved in the financial planning industry for almost 20 years, says because of IPS 146, one of his proper authority holders was "pushed" into retirement.

According to ASIC, IPS 146 sets out the minimum education and training standards that authorised representatives, agents and employees must meet by 30 June 2002.

Licensees and life principals have existing obligations under the current Corporations Law and life insurance regime to ensure that their authorised representatives, employees and agents are adequately trained for the duties they undertake. These obligations operate independently of the proposed FSR legislation.

Further concerns in Dunn's mind include issues of technology, industry research, fees and legislation.

"I wonder how much egg some of the research houses have on their face, really," he says.

"Property was the best performing asset class in 2000, however, most research houses only indicated the class was 5 per cent or less than 10 per cent. It was a bit of a rude awakening."

In regards to the issue of fees and industry legislation, Dunn believes that so far advisers have born the brunt of reduction in fees for clients.

He says if you were to look at fees for master trusts, in the growth funds pools, the range in fees is between 56 basses points to 96 basses points.

As for legislation, Dunn says actions by the Department of Social Security (DSS) and the ATO whereby they overturned convention is unfair.

He says that the DSS has implemented legislation that targets people who have a trust fund and who tried to avoid the asset tests five years ahead of pension by simply ignoring the trust.

"This legislation is retrospective in that it catches people that gave money away more than five years ago. These people lost whatever pension they had," he says.

The ATO attacked the tax effective investment, denied tax returns for clients up from 4 years ago, it is all fairly unsatisfactory."

Count Wealth managing director Barry Lambert says the same issues will dominate the financial services landscape as previous years.

"It's the same issues each year in and out," he says.

However, despite his view, Lambert directed his concerns to internal strategies in business.

"My message to financial planners and accountants is to think carefully about your business because before you know it, it will be basically be quick sand," he says.

"There is going to be more changes. Why? Because the industry hasn't done a very good job."

Lambert says planners should not be concerned with regulation but business efficiency.

He says to survive in the industry, businesses need to realise there are other groups out there fighting for the same goal - profitability.

"With the squeeze in competition, there has been a push towards higher margin investments," he says.

"It could be that the disappointment of the early 90s will be repeated. There could be an unlisted property trust debacle. The high margin products could come back and haunt the industry."

Ken Breakspear, CEO of Financial Planning Association

Delays in the Financial Services Reform Bill

Delays in Alienation of Personal Services Income

Licensing legislation

IPS 146

Adviser education

Peter Dunn, director Moneyplan

IPS 146

Technology

Research

legislation

Fees

Barry Lambert, managing director Count

Business efficiency

Competition

Profitability

Technology

Regulation