The Labor Party will support the reforms outlined in CLERP 6 subject to a few amendments which will probably delay its introduction, says shadow minister for financial services and regulation, Senator Stephen Conroy.
The Labor Party will support the reforms outlined in CLERP 6 subject to a few amendments which will probably delay its introduction, says shadow minister for financial services and regulation, Senator Stephen Conroy.
Speaking at the CFP conference in Hobart late last month, Conroy says the January 1 timetable for next year might be “ambitious” as the draft bill has now been referred to the Joint Parliamentary Committee on Corporations and Securities.
“The purpose of referring the draft bill to the committee was to enable all parties to be consulted and all concerns raised and discussed well before the bill entered Parliament,” Conroy says.
“This means the government’s commitment to having CLERP 6 commence on January 1 might be ambitious.”
Labor has concerns over exempting certain professional bodies from the licensing regime facing planners, a concern shred by the Financial Planning Association.
Conroy said that while CLERP had the potential to provide a competitive-neutral regime on licensing, the professional bodies exemption went against the spirit of the bill.
“I am concerned, like the FPA, about proposals to permit ASIC to exempt certain professional bodies, which offer incidental advice as part of their profession, from the requirement to be licensed,” he says.
“It must be asked why not just apply for a financial services licence? This has the advantage of ensuring competitive neutrality and avoids the creation of a self-regulatory regime alongside the provisions of the corporations law.”
Another area of the bill that concerns Conroy is the disclosure of back-office commissions.
He believes commission disclosure is a critical part of the decision-making process for consumers.
CLERP 6 states that if a payment for back-office services is included in the commission paid for an individual product, then it does not have to be disclosed.
Conroy has no problem with a payment for the service when it equals the cost of performing the back-office function.
“I remain to be convinced, however, that it is possible to ensure that the payment for the service will always equal the cost of performing the service,” he says.
“There is the potential for the payment for the service to be inflated and commission to be hidden in such a payment.”
“In that event, the performance of the back office function will influence the giving of advice. Without disclosure, the consumer will not know that the financial adviser has been so influenced.”
Conroy also argued at the conference that disclosing commissions as a percentage figure was not understood by the consumer and it should always be presented in dollar terms.
