Financialplanners, stock brokers and insurance agents are being kept in the dark on how compensation arrangements will pan out under Financial Services Reform (FSR) due to the Government “dragging its feet” and failing to release a draft issues paper on the matter a year after having received industry submissions.
The Government announced plans to release an issues paper for industry consultation back in February 2002, which it did later that year in September. Submissions closed two months later in November, however, the industry is yet to receive any direction from Government.
While the issues paper is unlikely to be the final say on intermediaries’ compensation obligations under FSR, it will be indicative of the Government’s position saysFinancial Planning Associationmanager policy and government relations, Con Hristodoulidis.
“The issues paper is likely to be 90 per cent of what will become effective post March 2004. Therefore it would be good to see what the Government’s position is going to be on this sooner rather than later, particularly if they’re going to go down the road of professional indemnity (PI), asASICwould have to release a policy statement outlining minimum guidelines,” Hristodoulidis says.
He says the most likely outcome will involve either advisers taking out PI, providing a bond or some form of added capital requirement.
According to ASIC consumer protection executive director Peter Kell, “At the moment nothing exists, and because ASIC is waiting for this stuff to come out all we’ve told licensees is the status quo applies”.
“People are buying PI cover without, at this point, any clear indication as to whether that will be adequate or whether they’ll need to go back to the insurer and get more,” Kell says.
A spokesperson for the Treasury department says the delay is largely an administration issue, and that its response has been “caught up in some final tick-off stages and should be released shortly”.
Hristodoulidis believes the portfolio changes, which saw Senator Ross Cameron replace Senator Ian Campbell as Parliamentary Secretary to the Treasurer, have also held up the matter.
“There was an issues paper that Senator Campbell was about to sign off on…[but] Cameron’s got to get around these issues — he’s not just going to rubber stamp them,” Hristodoulidis says.
