The lonely Senate voice backing advisers on annual renewals

The Royal Commission was not the font of all wisdom on the question of financial advice and the Government was never under any obligation to implement 100% of its recommendations, according to a Government Senator who was the former chief of staff to former Finance Minister, Mathias Cormann.

What is more, he warned the Senate that the bill and some others derived from implementation of the Royal Commission recommendations would simply drive up the cost of advice.

West Australian Senator, Slade Brockman, won the plaudits of a large number of financial planners when he stood almost alone in questioning the Government’s passage of legislation imposing annual renewals on financial advisers.

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Brockman used his speech in the Senate dealing with passage of the Hayne Royal Commission Response Bill 2020 (on Annual Renewal) said he feared that the suite of changes made to financial planning over the past decade “has created an environment where the cost of advice will increase and some Australians will not be able to afford high-quality financial advice and so will be forced into more set-and-forget products, like superannuation”.

“In an environment where you have best-interest obligations and where you have an end to trailing commissions, perhaps something we could look at in future is whether the yearly opt-in is the right time frame,” Brockman told the Senate.

“To me, one year is not a magical number. Perhaps two years is a more regulatory-friendly period to look at in the future. As a chamber, as a parliament, I would like us to keep thinking about these things. We need to create an environment where we allow Australians—Australian families, Australian businesses—to access high-quality and affordable financial advice."




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Comments

Comments

A good analysis of the situation by Mr Brockman, sadly to late to change anything. Interesting that we see one lone Senator saying what our industry bodies should have run with right from the start of the RC. The carnage we're already seeing in insurance will translate over to other areas in our fields of expertise. Our future plans are simple: shed around 1/4 to 1/3 of the lower end of our clients that we used to be able to take care of thanks to some diversified income we used to derive from them with their full consent, spend all our time with our top clients only, charge an up front fee for new non-referral appointments as I won't have spare time to give away freely, and absolutely no way consider purchasing a client base or another practice. And please don't take this as words of wisdom, just one person venting their frustration and needing to make a decision on how to move forward.

You have highlighted problem of trail commission I. Your comments

“Spend all our time with top clients only”

Yes I agree. Sadly the business emphasis has changed from "how can I help clients for a reasonable income", to "how can I guard the business against compliance problems, and non-profitable work, while helping clients" Guess I am learning to think like a government official.

But he still voted for it. Fortunately there are cross-benchers who are prepared to revisit it, as they cannot believe this Coalition Govt has increased advice costs to consumers by $30 million every year, according to Treasury advice in the bill's Explanatory Memorandum. This legislation is extremely hypocritical when Jane Hume claims to want to reduce consumer advice costs, but she has jacked it up by $30 million pa. Don't these MPs & Senators read their EM's? Frydenberg's advisers seem to have lost the plot (or are his advisers really too close to certain big business interests who actually want this outcome?) Perhaps the latter is closer to the truth. If they think this issue is going to go away, they are horribly mistaken, particularly with an election coming up in the next 12 months.

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