The Federal Treasury has admitted it has not done a complex international comparison of the Government’s proposed Future of Financial Advice (FOFA) changes and experience in major overseas jurisdictions.
The absence of any such comparison has been revealed in the Treasury’s answer to a question on notice during Budget Estimates by Tasmanian Liberal Senator, David Bushby, and reveals that while the Treasury has monitored events overseas, its observations have fallen short of definitive point-by-point comparisons.
Bushby has told Money Management he is disappointed in the Treasury’s answer and will be pursuing the matter further when Parliament resumes after the winter recess.
For his part, Financial Planning Association (FPA) chief executive Mark Rantall questioned whether objective judgements could be made about FOFA in the absence of international comparisons.
"Reforms of this magnitude that impact on both clients and financial planners should be viewed in a global context to see what works and what doesn’t," Rantall said.
"As an example, opt-in is not being introduced anywhere in the world because it is an inappropriate law," he said.
Rantall pointed to the fact that examinations had been introduced in South Africa and were having a major impact on financial planners.
"The UK is looking at enshrining financial planning in legislation and banning commissions on insurance is not being implemented to my knowledge," he said.
"What global legislators are doing is important to give context to the extent of the wide ranging changes here and should be considered," Rantall said.
Senator Bushby had asked the Treasury whether, in the context of its work on the FOFA changes, it had performed research on overseas regulation regarding payment for advice.
He asked whether, if this were the case, Treasury could complete a "matrix" based on whether countries had banned payments to financial planners in relation to superannuation products, managed investments and life insurance.
Taking the question on notice, the Treasury later said it had "monitored developments in comparable overseas jurisdictions" and in particular the United Kingdom. However, it said it had not undertaken any "matrix" of jurisdictions on financial advice issues.
"Different regulatory approaches make a direct comparison between jurisdictions on the basis of superannuation, managed investment and life insurance through such a matrix difficult and possibly misleading," the Treasury response said.
It cited, as an example of the difficulty in completing such a matrix, the "unique" nature of the Australian superannuation system.
Senator Bushby told Money Management he did not accept that Australia was particularly unique or that the Treasury could not provide an appropriate comparison and that he would be pursuing the issue further when Parliament resumed.
"FOFA has caused deep concern in the industry and these issues need to be pursued," he said.
