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.
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.