Cleaning up after the Storm
Forget the fact that Storm Financial clients were paying hefty upfront fees, the collapse of the company represents a catalyst for the Federal Government to act on the question of commissions-based remuneration models, particularly as they apply to superannuation.
If anyone doubted the manner in which remuneration models have re-emerged as a policy issue in 2009, they need only have listened to the chief executive of the Financial Planning Association (FPA), Jo-Anne Bloch, when she addressed a recent summit in Sydney.
The essence of Bloch’s address was that the financial planning industry needed to put its house in order on the question of remuneration or risk intervention by the Government.
“The industry must now look more closely at advice-based fees negotiated between advisers and clients or risk the imposition of new regulations,” Bloch said.
“We need to push this more now than ever, or we’ll end up with tough regulation that will take away the income of some planners.”
Bloch could not have been more blunt in her assessment, and financial planners should heed her words in circumstances where political debts and political expediency suggest the Government probably now feels that the time is right to address the remuneration issue.
When it comes to political debts, there is plenty of evidence that those running industry funds feel they are owed for the support they delivered to the Government. When it comes to political expediency, it is hard to go past the controversy and emotion attaching to the collapse of Storm.
However, the Minister for Superannuation and Corporate Law, Senator Nick Sherry, is not naive on the importance of commissions to the broader construct and operation of the financial services industry. He would be well aware that to move too radically would be to undermine the viability of many financial planners and their firms, not to mention the clients they serve.
The minister cannot move on the question of commissions without, at the same time, lifting some of the strictures on the provision of advice.
Thereafter, the real challenge for the minister and for the industry is to agree upon an appropriate regime wherein commissions are not so elemental.
Bloch is right to warn the industry about the Government’s emerging agenda and, having done so, she must ensure that the FPA is ready to lead from the front.
— Mike Taylor
AUTHOR
Mike Taylor
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