Reform benefits outweigh the costs

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While reflecting on 2012, Minister for Financial Services and Superannuation Bill Shorten says he is proud of financial services reforms, including FoFA and the move to improve consumer rights in the insurance sector.

He said the best interest duty and the new financial advice licence for accountants, provided a more competitive, client-focused market for financial products and advice, and would ensure Australians can access good quality financial advice and give the financial services industry a stronger foundation.

Shorten believes the benefits of the reforms will outweigh any costs they have on financial planners, saying they will “contribute to an increased demand for advice and new opportunities for the financial advice industry, offsetting any transitional costs to comply with the new requirements”.

When asked how he had made the transition easier for planners, he said the government had made many decisions that would relieve businesses from some of the regulatory burden associated with the original proposals. These included the delay of the mandatory start date by one year to 1 July 2013, and ASIC’s announcement to take a facilitative compliance approach for the first year of mandatory application, to assist the industry in adjusting to the reforms.

Shorten also tackled the issue of underinsurance in Australia, saying he had addressed both non-insurance and underinsurance, by increasing public awareness.

“For non-insurance, where consumers do not hold insurance for some of the risks they are exposed to, the Government is helping to provide better information about risks, so that people can make better decisions about getting the insurance cover they need… The Government is also looking at ways to address affordability issues, for example by reducing risk through mitigation.”

“For underinsurance, where consumers do not hold adequate cover for the losses they suffer, the Government is improving transparency so people are better aware of the level of cover under their policies. The introduction of the Key Facts Sheets will draw attention to the difference between concepts such as ‘sum insured’ and ‘total replacement value’.”

For 2013, Shorten still says “increasing people’s superannuation benefits so that they have more money when they retire” is at the top of his list.

Read the full Q&A here.

More stories:

Shorten reflects on 2012 and regulatory changes

Time to review your clients' super as taxes announced

Planners’ expectations for 2013 revealed

 

  • Pat on 7/02/2013 8:21:59 AM

    Peter, you keep going on about failed schemes, but weren't AIOFP members very heavy promoters of Astarra/Trio, and weren't member firms paid "marketing fees" or other payments by Astarra/Trio for recommending these funds to their clients?

  • Peter Johnston - AIOFP on 6/02/2013 5:07:26 AM

    Matthew, lets don't forget that all the MIS Agri schemes and the other $36b of failed/frozen funds were legitimately on the market having passed the ASIC and Research house approval processes.Yes the commissions were too high [but approved by the regulator]and all the lawyers/accountants/trustees/custodians were all feverishly feeding off the carcass's. Lets not forget that over 40% of Great Southerns inflows were from Accountants licensed directly to them but somehow 'the advisers' were only the 'independents'and the accounting fraternity escaped the scrutiny.Yes it was a dark time for the industry but you cannot level the blame solely at the 'advisers' everyone was at the trough!

  • Greg F on 5/02/2013 10:24:31 AM

    Just like Property Investment schemes??

  • Matthew Lock on 5/02/2013 9:18:23 AM

    Politics aside Peter, there are always unintended consequences whenever regime change occurs in an industry...however let’s not lose sight of the fact that the main driver for FoFA was the financial disasters imposed on the community with the billions lost and thousands of lives destroyed through the mis-selling practises of either poorly trained or downright dishonest planners and in some cases their complicit dealers and institutions. If the industry stayed as it was what assurance could the profession possibly hope to give the community that these disasters wouldn't occur again with the same monotonous regularity that they have done so in the past?

  • Paul F on 4/02/2013 2:35:04 PM

    If Shorten had bothered to put his legislation through his appropriate processes then this statement would have some credence.
    Matthew I don't disagree with your thoughts and believe that some of the proposed changes will help the industry. The thing is that the original changes that were considered under the Ripoll review are the sensible ones. The ones Shorten dropped in there to ensure the Labour Party's ongoing revenue streams from industry funds (were all profit goes to members??) are the ones that most of us see as onerous and in no way consumer supportive.
    Institutional models will continue to thrive on product based sales and Industry funds will continue to charge advice fees through their administration fees and not disclose them. The only Australians who will be able to afford advice will be those willing to shell out $2500 or more annually and that unfortunately will be a very small number, especially when the description ‘Financial Planner’ is seen as a negative after over $30m of industry super members funds was diverted to a smear campaign.
    I am still very positive on this industry but it will never be any thanks to the extraordinarily conflicted Bill Shorten.

  • Peter Johnston - AIOFP on 4/02/2013 12:16:32 PM

    If it was a level playing field i would agree Matthew, CLEARLY IT IS NOT. How can you have 85% of the adviser market cross subsidising aligned loss leading practices with platform revenue and SMSF operators doing similar things with audit revenue and expect the truly independent sector to compete? When you consider Rudd won by 27,000 votes in 2007, Gillard did not win and the Shorten/Weaven/Silk team has alientated at least 20,000 votes no wonder Shorten is trying to 'placate' the market. Hopefully they will get exactly what they deserve come September.

  • GAB on 4/02/2013 11:32:56 AM

    "allowed to evolve" being the operative words Matthew. You are telling us to embrace reform that was largely imposed by the Industry Super Fund movement. I'm not against reform...but am against it when it's pretty clear what the outcome was designed to achieve. The extra disclosure paperwork only relates to those who already disclose (plain weird). Absolutely no intent to help advisers see more people..quite the opposite, so now what we see are the quality advisers focussing on the wealthy clientele because they can afford to pay for the service. Hardly in line with Labor virtues....

  • Matthew Lock on 4/02/2013 11:13:43 AM

    "benefits of the reforms will outweigh any costs"...I coudn't agree more...the industry needs to be allowed to evolve...and to all those institutions, platforms, dealers and planners who are resisting this change..I say...remember treading water is just deferred drowning...no doubt the transition will be tough but the sooner all the players in the industry get on board the better.

  • GAB on 4/02/2013 11:09:58 AM

    I can't see the increased demand for financial advisers i'm sorry...the extra costs get passed onto the consumer, that's already happening.

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