Proposed financial advice and superannuation reforms in limbo

While the results of the Federal Election have finally been decided, the future of Labor's proposed changes to financial advice and superannuation remain uncertain. Lucinda Beaman reports.

Labor was returned to office last week, in charge of a minority Government with the support of the Greens and independent MPs Rob Oakeshott, Tony Windsor and Andrew Wilkie.

The make-up of the new Government throws up a number of questions for the financial services industry, in particular, which of the policies outlined by Labor prior to the election it will seek to carry through in the now more tenuous political landscape.

Financial Services Council (FSC) chief executive John Brogden said it is too early to say whether Labor’s proposed reforms to the financial advice and superannuation industries will continue in their current form.

“[Labor] laid out a pretty comprehensive reform agenda before the election,” Brogden said.

“What we don’t know is how much of that will now go to the Parliament. That’s not because they’re not going to deliver on their promises — it’s because [they will be] going through everything on their agenda and working out what is worth taking through a very different Parliamentary environment.”

That will depend, in part, on what support Labor can garner from the Greens and the independent members of Parliament on its key financial services policies. Those positions are not yet known, Brogden said.

“I’ve had brief and informal discussions in Canberra with Rob Oakeshott and Tony Windsor. There’s nothing that I can reveal from those at this stage, but we, along with the rest of the Australian business community, have a job ahead of us to get our agenda across to them.”

Brogden said it was vital for the financial services industry to get its message across not only to the Greens as a party and to the kingmaker independents, but to all the independents, as “every vote will be a different vote in a different policy issue”.

Another person likely to be the target of intense lobbying is the incoming financial services minister.

It has long been expected that incumbent Financial Services Minister Chris Bowen would be promoted in the cabinet reshuffle to the finance portfolio.

The day after the final election result, Brogden was full of praise for Bowen, saying the FSC had had a “terrific” working relationship with the minister who he said had, “in his reasonably brief 15 months in the job, done very well, and certainly got on top of what is a pretty complicated industry”.

“We’d be very happy if he stayed,” Brogden said.

“But if he were to go, we need somebody who’s committed to the reform agenda in financial services.”

In response to the election outcome, the Financial Planning Association (FPA), led by Mark Rantall, urged the Labor Government to “move quickly” to finalise details of its proposed Future of Financial Advice reforms.

“The planned reforms will significantly affect financial planners, particularly those operating small businesses.

"The FPA is urging the Government to finalise details and move quickly to ensure planners can appropriately adjust their practises to meet the imposed deadlines,” Rantall said.

Rantall said the FPA was “looking forward” to continuing consultation on the implementation of the reforms, and would seek to brief the relevant MPs and Senators to “ensure they are across all aspects affecting financial planners and the finances of Australians”.

The FPA used this opportunity to highlight the fact that the Labor Government’s proposed banning of commissions to advisers by July 2012 had been introduced “in line” with the FPA policy already in place. Rantall reinforced the fact that the removal of product commissions to advisers would “dispel accusations of conflicts of interest”.

Richard Klipin from the Association of Financial Advisers (AFA) said simply that his association wanted to see issues relating to financial advice become “a main event in Canberra, rather than a side act”.

Klipin described Australians as being “under advised, under funded and underinsured”, and as such issues relating to financial advice needed to be taken more seriously in Canberra.

Rantall also argued advice “should play a bigger role in retirement income savings”, adding the Government should be encouraging Australians to seek financial advice.

The not-for-profit superannuation fund sector, represented by the Industry Super Network and the Australian Institute of Superannuation Trustees (AIST), said Labor must push ahead with the lifting of the superannuation guarantee (SG) and other reforms aimed at addressing the superannuation adequacy gap, namely, rebating contributions tax for low income earners, improving the concessional contribution caps, modernising the super system and eliminating commissions paid to advisers.

Unsurprisingly, the Association of Superannuation Funds of Australia and the FSC also pointed to a higher SG as a key election promise they hoped would be implemented.

Brogden reaffirmed that while the FSC supports “the majority” of the reforms outlined in the Cooper Review, and the Future of Financial Advice reforms, the association does remain opposed to “some small elements of both of those reform agendas”.

In particular, the FSC and the FPA remain opposed to the MySuper proposals outlined in the Cooper Review and supported by Labor.

But despite some differences in agenda, the overall reform agenda must be allowed to proceed, Brogden said, as it provides the financial services industry “with the opportunity to embrace change that will lead to a higher level of trust between consumers and the financial services sector”.

“Business has two choices — we can damn this Government now and say it won’t work, or we can drive the agenda with the Government and with the Parliament, and judge it on its performance. I prefer the latter,” Brogden said.

“It would be very wrong of the business community to write off the reform agenda before it even starts.”