THE PAST three years have been very intense on the regulatory front, with two key pieces of legislation having a profound impact upon the financial advice landscape.
While the main focus has been the Future of Financial Advice (FOFA) legislation, Stronger Super legislation has also brought about very significant change – and with significant implications. Another important issue for the financial services industry has been the changes around default superannuation.
These last three years have also been very vigorous in a political context, with a minority government and the two major parties having some quite different views on key pieces of legislation. This has led to an active lobbying environment in which much focus has been placed upon winning the support of the independents.
The Labor government had a clear agenda and while the industry has been supportive of some of the key elements, there has been much debate and disagreement about others.
During this period, the Association of Financial Advisers (AFA) worked closely with all stakeholders. We particularly enjoyed working with Senator Mathias Cormann, who has developed a strong understanding of the industry and has delivered a practical perspective on a number of the key regulatory changes including FOFA, MySuper and the Tax Agent Services Act (TASA).
With a convincing win by the Coalition on September 7, we now enter a new era with a strong majority in the House of Representatives but still some uncertainty as to the likely position in the Senate. We may need to wait until the Senate changes on 1 July 2014 to understand the implications in the upper house.
We look forward to working with incoming Assistant Treasurer, Senator Arthur Sinodinos, and also to building a relationship with the new shadow minister, once appointed.
Having come through a period of intense change and now working with a new government, we need to be clear that we are entering a period in which the focus is on how the legislation can be improved rather than fully repealed.
The Coalition has been clear since the release of its dissenting report to the parliamentary joint committee FOFA inquiry in February 2012 on the changes it proposes to make to the FOFA legislation.
We support the key changes they have committed to, which include:
- Repealing the Opt-in obligation
- Removing the Fee Disclosure Statement obligation for existing clients (those taken on pre-1 July 2013)
- Removing the ‘Other steps’ requirement from the best interests duty
- Clarifying the use of scaled advice under the best interests duty
- Refining the ban on conflicted remuneration for insurance inside superannuation
In our opinion, the priority FOFA issues, which we believe can initially be addressed through regulation rather than legislation, are as follows:
- Removing the obligation to prepare Fee Disclosure Statements for existing clients. As this obligation is live now, the industry requires certainty in this area so a quick solution is essential
- Resolving the issues around advisers changing licensee, whereby an adviser who moves from one licensee to another after 1 July 2013 will lose grandfathering. This issue has put recruitment on hold and is therefore distorting what is usually a very competitive marketplace
- Enabling corporate superannuation advisers to both recommend funds to employers and continue to service these funds
We were pleased that the negotiations on TASA in late June delivered a more sensible outcome. However, we appreciate that there is much still to be finalised in this area and it will remain a key focus for us in the lead-up to commencement on 1 July 2014.
About Phil Anderson
Phil Anderson is chief operating officer of the Association of Financial Advisers.
