2013 was another eventful year for the financial services industry. In its annual top 5 feature, Money Management looks at some of the most memorable moments of the last 12 months.
- Biggest events of 2013
- Top 5 wins
- Top 5 fails
- Top 5 moves of 2013
- Top 5 policy issues
- Top 5 acquisitions of 2013
Grandfathering: the ball’s in the air
Grandfathering – specifically the transition of pre-existing commission-based advice fees into the new Future of Financial Advice (FOFA) arrangements – was an industry football that kept getting kicked around and is still in the air.
Despite industry pressure for clarity on the issue, the then Federal Government did not fully define the terms around grandfathering until March, setting a 1 July 2014 start date. However questions soon arose around the transportability of commissions when an adviser changed licensees.
With much of the FOFA legislation and regulation coming thick and fast in the lead-up to 30 June, as well as political tensions and leadership change within the Labor-led Government and a Federal election, this issue has yet to be clarified.
The uncertainty has led to business valuations being called into question, while sales and acquisitions have been put off indefinitely despite the incoming Coalition Government promising to offer relief and certainty on the issue – a promise they have yet to fulfil.
Super: bipartisan backing for SG rise
Superannuation received a boost, literally, at the start of the year, with news that the superannuation guarantee would still be lifted to 12 per cent despite the absence of revenue from the Minerals Resource Rent Tax. At the same time the Opposition said it would not block the increase if it gained government.
By the time of the May Budget, tax incentives for high income earners were being reduced while concessional contributions would lift to $35,000 for people over age 60.
Further super policy would be thrashed out by a Council of Super Custodians – a body which was criticised as being a junket for friends of the Labor Government – and was after the Coalition took government.
However superannuation will get another in-depth examination as the new Government announced the ‘Son of Wallis’ inquiry will take place in 2014. The former Government claimed before the election that there was no rationale for it and committed itself to a five-year freeze on tinkering with super – a position the new Federal Government would not take.
TASA timetable tightens
The announcement that planners would have to comply with the Tax Agent Services Act (TASA) alongside other regulatory change was an unwelcome addition many had not expected.
The prospect of dual regulation – and education requirements – under TASA and Future of Financial Advice (FOFA) legislation had industry groups talking with the Federal Government and Opposition about the timetable for compliance with TASA.
The planning sector claimed that it had only five months to digest the changes, while the accounting profession had been talking TASA for 15 years. Despite this the Federal Government still insisted on a 30 June start date before relenting and referring the issue to a Parliamentary Joint Committee (PJC).
The PJC pushed the timing for transitional arrangements to 31 December 2013, with a dissenting minority report recommending it be 30 June 2014 – a position supported by the Financial Planning Association and the Financial Services Council.
After some horse-trading in Canberra between the Government and Opposition to pass the legislation, the start date will be 1 June 2014, with transitional arrangements to last for three years until 2017.
FOFA kicks in – and for touch
The Future of Financial Advice (FOFA) reforms were well-heralded long before they reached the Parliament, but that did not stop them becoming an industry-wide hurdle that small and large planning businesses had to overcome.
The legislation has been passed but some exact regulations are still pending (eg, grandfathering – see above), while the status of others are uncertain, with the new Federal Government promising to remove the opt-in provisions and streamline Fee Disclosure Statements (FDS).
While they may be mandatory, FDS have not met with universal acclaim. Some advisers claim clients are confused as to what FDS are, saying many believe they are an invoice – or alternately do not even read them. Advisers have also claimed FDS duplicate information already supplied to clients in Statements of Advice – and are awaiting fulfilment of the new Government’s promise to streamline them.
The Australian Securities and Investments Commission (ASIC) continued to interact with the planning community, asking for feedback on suggestions to make degree-level qualifications mandatory by 2017 for entry into financial planning.
While the wider planning community agreed with the idea, questions still remain about the details.
Some industry players are also asking for ASIC to hold back until FOFA has been operational for at least a year before requiring further industry change.
Churn debate churns
Churn is an issue as old as insurance itself and this year the issue seemed to set to sail in calmer waters, with the Financial Services Council (FSC) announcing it was not going ahead with a proposed policy on churning. This was well received by the Association of Financial Advisers (AFA).
However the FSC reversed this decision in May and decided to take another look, while the AFA called for talks around the issue.
The AFA requested that insurers provide data around the issue and questioned whether the real issue at hand was the long-term sustainability of insurers and not advisers moving clients for commissions.
Synchron’s Don Trapnell also called for evidence to be produced after ASIC confirmed it was looking into the issue and would do so well into 2014, a stance the Australian Prudential Regulation Authority will also take after noting that it appeared most churn/lapse issues took place in the direct insurance market.