While the federal Liberal Party is licking its wounds over the crushing defeat of the state Liberal Party in Victoria, it might want to consider how much of a role its treatment of the small and medium business sectors in general and the financial services business sector in particular has played.
Let’s look at some of the things the Liberal Party has supported in recent history, starting with the most recent, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The royal commission is exactly what it says it is – an investigation into misconduct. It focuses on the small percentage of the industry that is doing the wrong thing and ignores, as does the government and media commentary, the majority that is doing the right thing.
While there is no argument that the wrongs of the industry must be righted, this is an industry that, just for starters, paid out over $9 billion in life insurance claims in 2016 to over 108,000 people according to The Risk Store. This translates to over $26 million per day in lump sum payments.
Many of these claims were a result of the fact that a financial adviser, usually a small business owner, recommended that a client buy life insurance to protect their most important asset – themselves. Every dollar that is paid out via a life insurance claim is potentially a dollar saved by the government in the form of welfare payments.
Now let’s look at the Life Insurance Framework (LIF). LIF reduced adviser commissions by up to 50 per cent following arguments that included that such a move would make life insurance more affordable, improve take up of policies and therefore help relieve Australia’s welfare debt. In reality, premiums have risen since LIF, which must only serve to prove those arguments false.
Then there’s the new ASIC ‘industry funding fee’ purported to be in the region of $1,500 per adviser, per annum, due to be charged from January 2019. I have several problems with this. The first is the nomenclature – let’s call this what it is; a tax on licensees, who have no choice but to pass it on, and therefore, by extension, a tax on small business advice practices.
The second is there has been no confirmation on exactly how much the tax is actually going to be. It is almost December and we are expected to start paying from January – how does a business forward plan for a tax as expensive as this (potentially around $750,000 a year for a licensee the size of Synchron) with such scant information?
The third and perhaps the most important is why there needs to be a tax at all. According to a submission to the royal commission, reported by The Australian, a former ASIC executive officer, Richard Harrison, revealed that in the period 2004-2014, ASIC raked in a staggering $4 billion plus, mostly collected from small business and the public. Most of this money went into the federal government coffer. Why doesn’t the government channel a bit more of the profits it makes via ASIC’s collection of money from small business and the general public into appropriately funding what ASIC is supposed to do – i.e. supervise the industry?
But all of these issues are quite macro. I have not yet even scratched the surface of the myriad micro things the Liberal Party government has supported that profoundly affect the ability of financial advisers to run businesses that can support them, their families and their staff, and provide meaningful service to their clients. To cite just one example, let’s look at the changes to superannuation.
The Liberal government has made changes that mean you can’t make more than $25,000 in concessional contributions a year. To add insult to injury, the government has imposed a $1.6 million transfer cap that limits the amount of money you can transfer to pension phase, although you can leave more than $1.6 million in the accumulation account and pay 15 per cent tax. In other words, if by some happy circumstance you have more than $1.6 million to retire on, the government will tax you.
There are around 25,000 financial advisers providing advice to Australians on matters such as superannuation and retirement planning. As the pool of superannuation under management approaches $3 trillion, I acknowledge that Australians should have access to financial planners who are:
- Appropriately qualified; and
- Committed to putting the interests of their client first.
Yet the Liberal Party government has done almost nothing over its successive terms in office to encourage or support financial advisers or the clients that depend on them.
Once upon a time, business owners voted Liberal in the belief that it was more supportive of business than the Labor Party. As time moved on, business owners voted Liberal in the belief that while the Liberal Party was no longer overly supportive of business, to vote Labor would be worse. Recent times have proven that neither of these two beliefs ring true anymore.
According to ASIC, small businesses account for around 96 per cent of all businesses in Australia, employ around half of our workforce and make up around 20 per cent of our gross domestic product. The Australian Industry and Skills Committee reports that in 2017, financial services was the second biggest industry in the country, employing over 400,000 people and touching the lives of most people.
Measures that affect small businesses and the financial services industry profoundly impact on almost every adult Australian – and whatever way politicians care to look at it, that’s a lot of voters.
Michael Harrison, chair, Synchron
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