What an amazing year 2009 has turned out to be. So much has happened and so much has changed. But as Alan Kay said: “The best way to predict the future is to invent it.”
Talk about four seasons in one day — 2009 has been more like four cycles in one year. From the outset it was always going to be a difficult year. The fallout from Storm Financial and the global economic crisis prompted multiple Government inquiries that put the financial services industry at the forefront of debate.
So let’s just reflect on the state of the industry 12 months ago.
- The global economy was poised on the edge of a precipice as Lehmann Brothers fell.
- There was a chance that, but for strong action taken at the G20, a global economic depression would set in for the first time in almost three generations.
- With all this macro change, the reality on ‘Main Street Australia’ was that we were in good shape being connected to China rather than the US, but:
- house prices started collapsing;
- retail sales followed suit;
- business and consumer confidence fell through the floor; and
- people started losing money, jobs, their livelihoods and their sense of happy optimism.
Today, the story is very different. People are regaining:
- confidence;
- their jobs;
- their sense of happy optimism; and
- they are spending again.
Major Issues in 2009
The Ripoll Inquiry
The recommendations of the Ripoll Inquiry represent an important step forward in the journey towards making the financial advice industry one of Australia’s most trusted professions. The committee recognised the complexities of our industry and addressed all the major issues. The 11 recommendations are comprehensive and cover the key parts of the profession.
The Association of Financial Advisers (AFA) was pleased that the committee stopped short of recommending a ban on commissions, preferring to recommend that the Government take a consultative approach to the issue. Remuneration is a complex issue and we believe consumers should always have a choice about the way they remunerate their advisers.
We were also pleased that the committee recommended that financial advice become tax deductible. If adopted, tax deductibility will make advice more accessible and affordable to everyday consumers, which is a win for middle Australia.
The Ripoll Inquiry, which outlined a package of reforms is, on balance, a good report that will go a long way towards improving the industry.
Industry funds
The industry funds have spent millions in advertising dollars spouting their value proposition while poking a very large stick at adviser commissions. However, two questions that do not seem to have been asked are:
- Where has the money for that campaign come from?
- If their value proposition is so good, why does a stick need to be poked at other industry players?
The big issues for 2010
- Rebuilding trust: the keys to rebuilding trust are having the right market settings and the right policy settings. It’s about living and breathing transparency and sensible, workable disclosure.
- Adviser education: ensuring that advisers have a thorough, rigorous education — the right programs, the right courses and the right balance between theory, practice and knowledge.
- Regulation and government: the Ripoll Inquiry, the Cooper Review and the Henry Tax Review mean 2010 will be a significant year for government policy and implementation.
The AFA in 2010
This year has been extraordinarily successful for the AFA, which prides itself on being an association of, by and for advisers. Our key achievements include:
- membership growth of 26 per cent in 2009;
- membership doubling since 2006;
- significant investment on the policy and political front, resulting in increased parliamentary lobbying to ensure the voice of advisers is better heard;
- the GenXt program, which mentors and nurtures young advisers; and
- an extremely proactive campaign championing the unique and important role of advisers via carefully targeted public relations.
The AFA intends to maintain the rage in 2010 in order to ensure that our advisers are well-equipped to grow, manage and protect the wealth of everyday Australians. As John M Richardson said: “When it comes to the future, there are three kinds of people: those who let it happen, those who make it happen and those who wonder what happened.”
Richard Klipin is chief executive of the Association of Financial Advisers.
