The Government hopes the current round of refinements to Financial Services Reform (FSR), which it plans to make law by December 2006, will finalise the regulations and overcome “initial teething problems”.
In an exclusive interview, Parliamentary Secretary to the Treasurer Chris Pearce told Money Management the refinements would address issues raised during consultations on the first round of refinements last May, and he hoped no further changes would be needed.
“But I am absolutely determined to make sure that, in regards to the way Australians make decisions about their financial affairs, they have the best information available to them and they have full disclosure. If that means continual improvement of a piece of law, then I will do that,” he said.
Pearce said the refinements also aimed to reduce the “ever-burgeoning regulatory compliance issue” for the industry.
In April, the Government released its consultation paper on the new round of refinements. Consultation closes on May 19, 2006. A series of roundtable discussions held across Australia will follow. The results of the discussions and written submissions will then be put out for final public review before regulations are brought in.
Pearce said a key area for debate in the consultation paper centred on the distinction between general and personal advice.
“There’s been a lot of consultation and feedback about whether or not that line is drawn in the right place … there have been cases where very generic descriptions have been classed as personal advice.”
He said resetting the line could help prevent consumers receiving “confusing, convoluted, legalistic” information.
“A lot of practitioners are supplying information to consumers, not necessarily because the consumer needs it, but because they need to tick their sheet that they’ve done it,” he said.
Input is being sought on this point and the wider proposals, including ideas on how to implement any changes.
“I’m very much supportive of the industry putting forward the practical implementation … People automatically think you’ve got to amend the law to achieve an outcome, but maybe it’s a case of regulation, maybe it’s a case of guidance from the regulator, maybe it’s a case of self-regulation.”
Pearce said it would be “hypocritical” for the Government to act unilaterally given Australia’s principles-based system of “disclosure, supervision, and education.
“But sometimes you have to intervene because not every market is perfect, and when the market doesn’t function perfectly, the Government should step in and bring about legislation,” he said.
Pearce thought it unlikely the Government would step in to settle the fees versus commissions debate.
“It is an industry problem, not a Government problem,” he said.
However, he added: “Not everybody can afford to pay upfront. From a Government perspective, one of the things I’m focused on is making sure that advice is affordable and accessible, and I would not want to see any restructure that would lessen the accessibility or affordability of advice.”
