The Government has seen fit to defer the implementation of the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry for at least six months. It should go further and conduct an audit of whether much of its approach even remains valid.
It is a fact of life that the Royal Commission was far from perfect and many of its recommendations were ill-conceived and flawed yet, in an act of almost breathtaking political expediency the Treasurer, Josh Frydenberg, committed the Government to an almost unquestioning ‘rubber stamp’ implementation process.
Therefore, if the postponement of the implementation timetable generated by the exigencies of the COVID-19 pandemic has done nothing else then it has given the Government time to consider whether its rush to unquestioningly implementing the Royal Commission recommendations remains wise or even equitable. Whether, instead, it might have applied some traditional discernment and carefully cherry-picked and practically modified some of those recommendations?
This is not to say that the core and well-accepted elements of the Royal Commission recommendations should be abandoned. Rather, it is to suggest that some of the less well-defined and thought through elements such as the provision of advice within superannuation and ongoing fee arrangements should be properly and objectively considered, taking on board the valid and long-standing concerns of the major financial planning groups.
Frydenberg might also care to consider the degree to which the Royal Commission did not extensively dwell on the superannuation industry and the manner in which some the Government’s own back-benchers, particularly Tim Wilson as chair of the House of Representatives Standing Committee on Economics, are now traversing issues either missed or ignored by Commissioner Kenneth Hayne and his counsel assisting.
As Frydenberg and his advisers may have already noted, the political heat has long since left the Royal Commission and its recommendations as Australia has sought to deal with drought, bushfires and now a global pandemic. The political expediency; the need to be seen to be doing something, which drove the Government’s initial response to Hayne has dissipated.
And in six months’ time the political heat will have dissipated further as Australia seeks to start clawing its way out from an exceptionally deep recession in circumstances where a great many clients will have owed the substantial preservation of their wealth to the efforts of their financial advisers.
For their part, neither the Financial Planning Association (FPA) nor the Association of Financial Advisers (AFA) should accept that the eventual implementation of the Royal Commission recommendations as a fait accompli. They should maintain their lobbying efforts, pointing out the flaws in Hayne’s recommended approach and the realities of what will work best for both clients and their advisers.
There is already talk on the part of politicians of a new reality and a new approach in the wake of the COVID-19. Financial planning should be no exception but it should be allowed to progress without being hamstrung by the things Hayne got wrong rather than the things he got right.
