There has been great speculation about the scope and the focus of the ‘Son of Wallis’ inquiry, with various commentators presenting their views on what may and may not evolve, and what should and should not be considered.
Meanwhile, others wait patiently on the fringes to see how it will all unfold.
From a financial services perspective, the sector naturally has a vested interest in the scope, review and outcomes of the inquiry. As it stands, however, a large part of the financial services sector is also only just coming to terms with the Future of Financial Advice (FOFA) and Stronger Super reforms which followed the 2009 Parliamentary Joint Committee on Corporations and Financial Services’ inquiry into financial products and services in Australia and the 2009 Super System Review.
Whilst 2009 and the initial inquiries may seem like quite some time ago, the period since has been filled with extensive consultation and reviews in order to give effect to the recommendations and outcomes of the respective inquiries.
To understand what this means in real terms, from a FOFA perspective, between February 2011 and May 2013 there were more than 15 consultation papers and exposure drafts developed. That amounts to a consultation paper every seven weeks for more than two years.
To say that participants in the financial services industry are suffering from regulatory fatigue would not be an exaggeration, just a statement of fact.
Aside from that point, however, the industry is more focused on and concerned with ensuring that the effort expended – including implementing new systems, processes and significant investment in financial and human resources – leads to the tangible consumer benefits that the reforms were intended to achieve.
This includes increasing consumer trust and confidence in financial advice as well as increasing the accessibility and affordability of advice.
It is perhaps too early to tell whether the FOFA objectives of increased consumer trust and confidence will be achieved. From an affordability and accessibility of advice perspective, however, business has borne significant increased costs for changes to systems and processes and invested significant human and financial resources to implement the regulatory reforms. This has increased rather than decreased costs which, unfortunately and invariably, flow down to consumers in one form or another.
Secondly, the FOFA reforms have driven substantial consolidation in the advice industry, resulting in the decline of advice provided through non-institutional advisers. When one considers that competition is a driver of productivity and economic growth and places downward pressure on prices, then one should also consider what may result from lessening competition in an already concentrated financial services industry.
These costs are far greater than increased advice costs.
It is, however, ‘still early days’ as some would say, and perhaps too early to assess the costs and benefits of the various reforms. Businesses are still implementing the various stages of the regulatory reforms, with some further FOFA changes expected from the new government.
As we approach a new horizon and the government considers the scope and review of the next inquiry, we would hope that particular consideration could be given to principles that not only maintain and promote competition but also that support a level playing field in financial services.
This can be achieved by balancing the benefits against the costs of regulatory reform and having regard to the intended as well as the unintended consequences. And most importantly, keeping firmly in mind the intended and actual benefits that the implementation of such reforms ultimately has for consumers, who were the key drivers of change in the first place.
About Bianca Richardson
Bianca Richardson is national client solutions manager at the Centrepoint Alliance, parent company of Professional Investment Services.
She is a former AMP financial planner and in 2013 was awarded the Financial Services Council (FSC) Industry Excellence Award for her contribution to industry working groups and forums.
