Uncertainties of 2016 move into 2017

The financial services industry is facing another year of uncertainty but there will be opportunities for it to become the master of its own destiny, Mike Taylor writes.

2016 has proven to be another year of moderate progress mixed with uncertainty for the Australian financial services an industry.

Because of the outcome of the Federal Election — the Government's waifer-thin majority in the House of Representatives and its lack of a majority in the Senate — the development and implementation of financial services policy has become even more of a guessing game than it was in the previous Parliament.

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The only certainty for financial planners stems from the largely bi-partisan support for increasing educational and professional standards. By comparison, significant question marks continue to hang over a range of other issues including superannuation and, to some degree, the legislation underpinning the Life Insurance Framework (LIF).

For the time being, at least, the clamour for a Royal Commission into the financial services industry appears to have died down but that relative silence will only last until the next "scandal" involving a bank, an insurer, a superannuation fund or a dealer group. Indeed, the one certainty for the industry as it moves into 2017 is that it still represents a ready-made target for negative media stories.

It is in these circumstances that those urging the industry to speak with one voice are correct. The major groups representing the financial planning industry would do well to carefully avoid the appearance of division and disunity and instead coalesce around the policy issues that matter most to planners.

There are already signs of the major superannuation groups coalescing around key policy issues, with the Financial Services Council (FSC) reaching out to the industry funds groups and others to form the insurance industry working group and, continuing disagreements around issues such as default funds aside, more cooperation around key policy issues is likely.

Moving forward, it is clear from the Government's legislative and regulatory proposals around the educational and professional standards that organisations such as the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) will need to substantially change the nature of their relationships with their members.

In circumstances where the professional associations will be expected to act as the disciplinary arms of the new Professional Standards Body, they will need to have in place the disciplinary structures necessary to deal with recalcitrant members and a willingness to use those structures.

Some would say this is precisely what is needed to make financial planning a fully-fledged profession, but experience in other fields including medicine and the law suggests that structures can only offer limited success if underlying culture cannot be fundamentally changed.

The message from the Government throughout the year has been clear — it is prepared to allow the financial services industry to find its own solutions such as those developed via the LIF and those now being pursued via the superannuation industry's insurance working group, but failure to do so will give rise to Government intervention.

It is in the nature of minority Governments or those with waifer-thin majorities that they focus on the primary Budget and electoral issues first, and deal with other matters later. Objectively, financial services policy is a second-rank issue for the Turnbull Government but one that it cannot afford to ignore.

In those circumstances, the financial services industry will need to be fully focused on achieving its key agenda items in 2017 or face the risk of having to endure another round of unsatisfactory outcomes.

This is the last print edition of Money Management for 2016. We wish all our readers a Merry Christmas and a safe and prosperous 2017. Our first print edition will return in February, 2017.




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Comments

Comments

Mr Taylor,
You've overlooked a number of important issues in your article.
How many regulatory changes have you seen since the introduction of the Financial Services Reform Bill (FSR) in 2000?
What's changed because of it ?
The business of being a financial planner or a risk writer has become harder. Are the Public better off, ...well I seriously doubt it.
Who decided that setting up a RTO,.... could turn out a financial planner in 4 days.
What was wrong with the old FPA system of doing a minimum of 8 DFP subjects monitored through RMIT or Deakin University. That should have been the starting point plus some tertiary qualification /industry experience ?
The expansion of that program with 4 additional subjects should have been the minimum blue print for all who participate in financial planning.
You have a ignorant Prime Minister who thinks the majority of those who work in the industry have 4 days training,.... and that's it.
The politicians and those serving self-interests, think you can alter poor or bad behaviour through legislation.
I've got news for every one, .....until GOD manufactures the perfect "human being", ,.... this will continue.
Just take the rorting by politicians on both sides of the political divide with tax payer funded personal expenses. What's the difference between those who rort Centrelink and those politicians? The politicians think it's their entitlement !!!!
What a joke.... the financial services industry is the most over-regulated industry in Australia.
You call for industry representative groups to be united. How can they be united when they each have a history of capitulation and acquiescence.
They have shown almost no backbone and do not represent their rank and file members. To say otherwise is to believe the absolute garbage and rhetoric coming out of both associations.
The majority of the members of the FPA and the AFA are not truly represented by either organisation.
A weak, left leaning Liberal coalition government is counting on this scenario to continue.
Until the leaders of these organisations learn to stand up to the government, big business, Industry funds/Unions. disunity will continue.

Always astounded me that this industry would let people with a basic incomplete diploma manage people's millions, and with no finance experience hang out a shingle on the street. Even while the new education standards were being heralded I noticed my ex-dealer group advertising online for new advisers with DFP 1-4 to flog their new managed investment solution.

It really needs a total overhaul. Advisers with experience and high qualifications need to be recognized and be armed with tools to give advice efficiently, not burdened with more and more threats and compliance. They will leave. The bad ones will stay clinging on to this industry for as long as they can get away with it.....

only yesterday I met a small client, young married couple, less than 130K in super which was with 2 seperate industry funds both performing fine, one employer matching contributions, good insurance cover, via their employers, doing perfectly fine. An adviser had got hold of them, recommended they part roll out to a rival retail fund managed by him, and insurances tacked on. He charges 1%, hasn't seen them since he set it up 2 years ago. They both have 2.8M in life cover outside of their industry fund - no debt, no kids. He did contact them last month, not to review anything, but because he now wanted to recommend they roll to an SMSF as a new and better option - 5K cost for advice.
I sat back after that meeting and thought to myself:
1. I've been doing this for 30 years
2. I actually think the standard of advice may have gotten worse - because there are more products and options to fool people with ( in the old days it was a savings plan or super, insurance bonds, shares), and because the educational requirements ( as pointed out by Alleycat) have actually gotten easier!!
3. I see more confusion than ever amongst associations and interest groups, and a weak political set up exacerbating it all
In the 1990's I thought it would take maybe 10 years to change things. I was wrong. I now don't expect to see it change to any great degree in my advice life, which by the time I anticipate retiring, will be about 40 years. But I'm glass half full and will continue doing what I do.

Wow, really, an industry fund with good insurance cover???? That hasn't been my experience at all, love to know the name of it please Phil, and where you got the risk research

Well I call it an industry fund, its an employer fund and its not part of the Industry Super network. That said, the research I did was read the PDS and formed a view. And for 25-30 year olds with no health issues, who require predominately Life cover, the premiums were competitive. I

So the guys making these decisions on our minimum required education levels and experience, the pollies I mean, what is their minimum level of education and experience before they are allowed into their job of deciding everyone's fate and the future of our industry?

How ludicrous is our political system where it is basically a popularity contest based on who will tell the biggest lies to get elected.

Seriously have a look at the standard 'education' level of the senators, house of reps, and any of the federal (or state) politicians.

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