If you thought the last three years were a hive of political and regulatory activity for financial planners, then hang on to your hat.
Regardless of who wins the Federal Election on October 9, it seems we can expect another three years of political involvement in the business of financial planning.
Take the Labor party for example. If it wins office in less than two weeks, you can forget about taking commissions on your individual clients’ superannuation guarantee contributions. The ALP has long promised to ban commissions on SG contributions, as well as entry and exit fees on superannuation funds.
The Coalition has not put the squeeze on fees and charges as overtly as the ALP, but it has sent strong signals of its own to the financial services industry, particularly in regards to superannuation.
“I would thoroughly recommend to the superannuation funds themselves that as a measure of competitive discipline, that fees be made as low as possible and I will be seeking to have some discussions with the funds in relation to that,” Federal Treasurer Peter Costello warned in a recent statement.
If it wins office again, the Coalition has also promised to boost the resources of the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority and the Australian Taxation Office — a move that could make some financial planners nervous, given the current regulatory spotlight that has been placed on the profession.
All this has the financial services industry’s leading commentators on tenterhooks as October 9 draws near.
Investment and Financial Services Association chief executive Richard Gilbert, whose membership of large financial institutions would be affected by any ban on fees, is particularly concerned about Labor’s focus on super entry and exit charges.
With concerns about a rapidly ageing population and soon-to-retire baby boomers with insufficient savings, Gilbert says the abolition of entry and exit fees for superannuation funds is a misnomer.
“There’s all sorts of hurdles to get over before we reach this, and I don’t see [abolishing fees] as an election winner,” he says.
“You’re agreeing to abolish something that is negligible anyway.”
Gilbert says Labor’s retirement income pitch also lacks credibility, because the party has announced it will scrap the superannuation co-contribution for low income earners to help pay for income tax cuts.
This will severely affect Labor’s ability to achieve its set aim of ensuring people can retire on about 65 per cent of pre-retirement earnings — a policy Labor has dubbed ‘65 at 65’.
“Preliminary estimates indicate that Australians would be $2 billion further away from Labor’s own retirement income target of ‘65 at 65’ under the tax package announced by the leader of the Opposition, Mark Latham,” Gilbert says.
Gilbert says if Labor wins the election, it will need to revisit some of its policies.
“The co-contribution and the generosity of the contributions tax cut would have to be extended because that’s not going to make much difference to retiree outcomes,” he says.
“If they get in, obviously we have to go through the details, [policy] has got to be workable, enforceable and constitutional and I don’t think any of those things in detail have been examined,” Gilbert says.
The Association of Superannuation Funds of Australia (ASFA) has also questioned Labor’s plans to drop the superannuation co-contribution, although the association has commended Labor for committing itself to the ‘65 at 65’ target.
ASFA chief executive Philippa Smith says there are also serious question marks over the Government’s superannuation policy.
“There is no clear strategy from either side. Both parties’ super policies so far are patchy affairs,” Smith says.
The sentiments are shared by grass roots financial planners.
In the Sydney suburb of Gladesville, an area within Prime Minister John Howard’s electorate of Bennelong, financial planner David Carney of Aspect Financial says a clearer super system should be top of the list of priorities for political parties.
“One of the hardest things to get a client to understand is that super is not an investment, it’s just a tax structure,” Carney says.
“Some of the proposed changes have been to the total detriment of our clients who get quite disillusioned.”
Across the road from Mark Latham’s electorate office in the suburb of Ingleburn on Sydney’s fringe, adviser Stephen Varhegyi says both parties have a responsibility to educate consumers on their finances, although the financial planning industry also has a big role to play.
“Who is better placed to educate people — financial planners or a bunch of bureaucrats?” Varhegyi says.
There is some feeling that the message from financial planners as well as others, is starting to get through.
According to Gilbert, a noticeable difference in this election campaign is that more of the voting public is taking notice of superannuation issues.
“It’s been our observation that retirement savings policies are being looked at on both sides, so the punters out there aren’t mugs — they’re looking closely at what both parties are putting up,” he says.
And the more consumers take notice, the more it is likely to affect their voting intentions, ASFA’s Smith says.
“The political party that recognises that we — government, individuals and super funds — are in this ageing thing together, and puts forward policies to tackle it, will give themselves an advantage at the polling booths,” she says.
