"All talk and no walk": Shorten, Cormann talk tough on super reforms

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The political mudslinging shows no signs of stopping as the latest raft of super legislation passes through Parliament. What does it all mean for financial advisers?

The mudslinging competition kicked off with Minister for Financial Services and Superannuation Bill Shorten claiming that the Coalition was “all talk and no walk when it comes to superannuation governance”.

Shorten’s claims came on the back of the Coalition’s decision to vote against measures contained in the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 that Labor claims will raise the standard for those managing Australia's superannuation savings.

The bill, which eventually passed through Parliament, will also close a regulatory gap by giving APRA the same powers over superannuation funds that it has over banks and insurance companies, said Shorten, adding that it:

  • requires a trustee to put the interests of members of funds first at all times;
  • clearly identifies the duties that apply to directors of superannuation funds, including acting honestly and in the best interests of members; and
  • includes a power for APRA to make prudential standards for superannuation.

The bill implements changes recommended by the Cooper review into the governance, efficiency, structure and operation of Australia's superannuation system, claimed Shorten.

"I am disappointed that the Coalition voted against legislation that raises the bar for superannuation trustees including those overseeing industry funds, corporate funds and retail funds," he said.

"The changes demonstrate the Government's determination to improve trust and transparency in superannuation as we increase universal superannuation from 9 to 12%."

The prudential standards provisions, which Shorten claims will provide APRA with greater flexibility to adapt to industry developments, will apply from the day after Royal Assent. The enhancements to trustee obligations will apply from 1 July 2013.

Gold medal in red tape

The Coalition, however, has fought back against Shorten’s claims, with Shadow Assistant Treasurer and Shadow Minister for Financial Services and Superannuation Mathias Cormann claiming that Australians will have to pay for Shorten’s gold medal winning efforts in introducing yet more red tape to the super industry.

Cormann was speaking in the wake of AMP’s 2012 half-year results announcement, in which the bank claimed that that implementing regulatory changes will cost it between $60m and $75m.

AMP also revealed today that it had a team of 50 people working to implement FoFA and other regulatory changes imposed by the Gillard government over the past year,” said Cormann. “These are the costs incurred to pay for Bill Shorten's additional red tape by just one company.”

“No wonder Bill Shorten never took his FoFA changes through a proper regulatory impact assessment to assess the cost/benefit equation, arrogantly failing to comply with the rules set by his own government.”

He added that “conservative” estimates predict that FoFA  implementation across the whole financial services industry will cost around $700m – with $375m in additional compliance costs every year.

“These additional costs will ultimately make access to financial advice less affordable for consumers,” he said. “We remain concerned that FoFA unnecessarily increases red tape and costs for both business and consumers, while reducing choice, competition and diversity across the financial services industry.”

If elected into power at the next election, the Coalition has pledged to implement all of the 16 recommendations that it made as part of the Parliamentary Joint Committee inquiry into FoFA. These include:

  • the complete removal of opt-in;
  • the simplification and streamlining of the additional annual fee disclosure requirements;
  • improving the best interest duty;
  • providing certainty around the provision and availability of scaled advice; and
  • refining the ban of commissions on risk insurance inside superannuation.

“After the next election Australia needs a government that is serious about cutting red tape and costs for business and consumers instead of adding to it at every turn,” said Cormann.

Would the election of a Coalition Government really help the financial advice industry? Have your say by commenting below.

  • Keith L. on 20/08/2012 4:31:13 PM

    As someone who has never had to run a financial planning practice, Bill Shorten and the legislators who enact regulations from parliamentary prescription have absolutely no appreciation of the workload many existing and intended regulations inflict upon the industry. A simple and practical example is the No Call Register inflicted on the industry some time ago most likely because a handful of people complained about receiving calls from their planner. This has resulted in the necessity to check the register every time you have to make a call to a client you have not contacted for some time. Hours and hours wasted each year and for what benefit? None at all, just additional costs thrown onto planners which of necessity must be recovered from clients who are not on the register.
    Recently I paid 3 lots of $57 registration fee for the practice to a body called EDRS. I'm not entirely sure what they do, why the do it or what benefit it is to me, my clients or society generally. All I am really certain about is that if I wanted to remain in business I had to pay the fees.
    I have no problem with regulation and I don't care if the regulator is APRA, ACCC or ASIC. Just don't create additional bodies with their hands out for annual registration fees and more forms. Ideally, because many of the responsibilities of the aforementioned agencies overlap, if the Government were serious about saving money and reducing red tape, the agencies could perhaps be combined. One would hope with the benefit of collective industry and commercial knowledge under the one umbrella, procedures and processes could be simplified with the commensurate reduction in operating costs to practitioners.
    It is clear to most people in the industry that Bill Shorten's actions are unreasonable, ill-informed, have unintended consequences, are costly to implement and maintain. The unfortunate part is that Shorten's meddling does absolutely nothing to prevent or apprehend criminal elements operating within and outside the industry.
    I'm with Cormann on rolling back the red tape and removal of the useless and ineffective speed-humps scattered liberally throughout the regulations.

  • John Carroll on 20/08/2012 3:20:59 PM

    When this bill comes into force, let's see how the industry funds' trustees "put the interests of members of funds first at all times" and the directors' duties include "acting honestly and in the best interests of members". Does that mean full disclosure of the difference between earning rates and crediting rates, i.e. kick backs to unions and/or union officials, sponsorship of NRL, etc. sporting teams. How does that benefit members?

    Here, here, bring on the next election, not soon enough!

    Bill Shorten touted as the next Prime Minister?, not bloody likely.

  • Pat on 20/08/2012 3:11:36 PM

    It is obvious that current government policy around superannuation is simply revenue policy rather than a retirement policy. That, and their approach to further get in bed with the ISN, means this government has to go.

  • Craig Smith on 20/08/2012 1:52:03 PM

    Bring on an election today. Bill Shorten is a ISN network wolfsham posturing as the client's protector. All he is looking to do is to build his mates income and an unfair playing firls and oh yes his next job because when the E day comes these wallys are finished

  • Alan Tickle on 20/08/2012 1:21:56 PM

    The arrogance of Puppet Shorten now transfers to his string pulling Australian Super Fund the pupetteer who now take credit through advertising for getting rid of commissions on super.

  • Two Young Advisers on 20/08/2012 12:42:41 PM

    The Gillard Goverment are hell bent on killing our industry with red tape/costs to exhalt their mates in ISF network where many of them will again be sekking employment when they lose office next year. You may say we are cynical but the truth is the truth and that's all you can say about that. They took what should have been a good thing in FOFA, politicised it and turned it into crap that will protect no one and cost industry and consumers ridiculous sums of money. How long till the election again?

  • Paul on 20/08/2012 12:05:51 PM

    When's the reforms of the UNIONS SHORTEN!!!!!!

  • Al on 20/08/2012 11:59:24 AM

    This government has sought to detroy our industry. I say, bring on the election and get someone into government who knows what they're doing.

  • James Scott on 20/08/2012 11:46:37 AM

    of course they would, shorten has tried to make the industry extinct

  • ins wiz of preston on 20/08/2012 11:42:29 AM

    I have heard senator mathias cormann speak at many AFA CPD learning days.
    He is a fine knowledgeable man and is not doing deals with the ISN like mr shorten is. Senator Cormann is trying make our life easier not harder in my eyes. Bring on the election and get rid of this labour rabble.

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