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.