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Key bodies representing the financial services industry have broadly welcomed the Rudd Government’s plans to overhaul the financial advice industry, but there are some caveats to that support.
In welcoming the reforms the Financial Planning Association (FPA) expressed its belief that many of its members “already adhere to much of this reform”.
The FPA specifically welcomed the introduction of the ‘expert advisory committee’, designed to examine professional standards of advisers, the potential introduction of a new compensation scheme for investors as well as the expansion of the scope of intra-fund advice.
The FPA said, however, that there were “some proposals that raise concern for the FPA and would have a real impact on the business models in financial advice”. FPA acting chief executive Deen Sanders said the association is “keen to discuss these issues with government to ensure the balance is right on final implementation”.
The Investment and Financial Services Association (IFSA), led by John Brogden, specifically supported the banning of commissions in super as well as the requirement for financial advisers to have a fiduciary obligation to clients. Brogden said the intended reforms were a win for consumers and would build the community’s trust in the financial advice industry, but added there were further steps the Government could take to make financial advice more accessible.
“The Government needs to go the next step and make all financial advice tax deductible,” Brogden said.
The Association of Financial Advisers was not as welcoming of the reform, despite the remuneration of its main constituency (insurance advisers) being at least temporarily spared from the reform package.
AFA president Jim Taggart said the Government’s banning of commissions “denies consumers the fundamental right to choose how they pay for advice”.
“It is a major concern that in a free market, the Government should consider it necessary to legislate how any professional in any industry should be remunerated,” he said. “What we are seeing is disempowerment of the individual.”
AFA chief executive Richard Klipin also voiced concern over the extension of the powers of the Australian Securities and Investments Commission (ASIC).
“Granting ASIC extended powers effectively sets the regulator up as judge, jury and executioner,” Klipin said.
Klipin also said the extension of the provision of limited advice created “an unlevel playing field” and would “result in a ‘dumbing down’ of advice”.
The Association of Superannuation Funds of Australia (ASFA) in particular welcomed the intended broadening of the scope of intra-fund advice. ASFA chief executive Pauline Vamos said the changes would allow super fund members to “establish a relationship with their fund to gain advice at all stages of their lives”.
Vamos said super funds would not be the only beneficiaries of these changes.
“The Government also recognises that financial planners should be able to provide limited advice services. I think we will see a large increase in the numbers of advisers who are willing and able to provide a full range of services, from simple to very complex. It is vital that simple questions like ‘where should I put my superannuation guarantee contribution?’ … be answered cheaply and objectively.”
