Leaders of Australia’s largest investors have warned government and opposition policymakers to clarify and ease any new regulations for financial advisers and the superannuation industry ahead of a likely May Federal election.
Superannuation and financial services minister Jane Hume and opposition spokesperson Stephen Jones said the wave of recent reforms from the last parliament will remain in place with some minor alterations, a Conexus Financial online panel discussion heard. (See link below)
Stemming the flow
AMP CEO Alexis George asked what a new government would do to stem the departure of financial advisers from the industry which had seen 10,000 leave in the past few years in response to tougher education and professional standards requirements.
“One of the problems, as I see it, is the uncertainty of what the future looks like for education, for CPD and mentoring and the structure of the business,’’ George said.
Minister Hume expected the “bleeding to have stemmed” for the advice industry by the end of 2021 with the government focused on bringing the next cohort through to replenish a future vibrant industry.
Jones said it was up to the market to resolve the business models to ensure people had the advice they needed in retirement years, with government providing the “guard rails” such as professional standards.
“Neither Jane nor I want to go back to the model where sales and advice are conflated,’’ Jones said.
UniSuper CEO Peter Chun asked for more clarity on how the Retirement Income Covenant would help his members when it comes into effect on July 1 to compel trustees to provide retirement options.
Jones said he had an “intense discomfort” with any loosening of current regulatory requirements for advice in the retirement products area because the “incentives for value capture are so great”.
He said independent advice needed to evolve in the retirement product phase to avoid history repeating.
“We need to be careful indeed about saying that we do that through another whole swathe of changes to intrafund advice which effectively sets up vertically integrated wealth creation and advice businesses,’’ he said.
Hume said vertically integrated models were not “outlawed” by the Hayne royal commission, merely recommended for improvement.
She said technology would create disruption in financial advice and it was up to the market on how that played out but government would make sure the regulatory settings were right to protect consumers.
The need for review
Meanwhile Financial Planning Association (FPA) chair Marisa Broome said regulatory compliance costs were a “significant part” of the more than $3500 it cost advisers to produce a piece of advice.
She questioned the need for another review, the Quality of Advice Review, when a bipartisan approach to new regulations now might be preferable.
“I really hope financial planning doesn’t become a football in this next election,’’ Broome said.
“I know that you both agree on many things in the same way but as a profession, we’ve been through so much. I’ve got members that are really leaving not because they don’t want to be an adviser or because they don’t want to meet education standards but because they just can’t cope any more.
“Don’t let politics get in the way of this [and] actually give us solutions as a profession.’’
Hume said the Quality of Advice review was timely and due to report by Christmas 2022 to see appropriate legislative change to make the advice industry more accessible, more affordable and more flexible.
Easier mergers ahead?
In terms of other changes to currently regulations, the minister was keen to “remove the grit from the wheels of the merger process” for smaller super funds currently tied by regulatory red tape and costs, in response to a question by Aware Super chairman Neil Cochrane.
“One of the problems is that each merger is different and it’s sometimes not that easy but we’re still very keen to see that happen,’’ Hume said.
More than 15 mergers and alliances in the super sector were announced in 2021 including Australian Prudential and Regulatory Authority (APRA’s) order for Christian Super to merge with a “larger, better performing fund” after it failed to meet its inaugural superannuation performance test.
Australia’s second largest fund Aware, formerly First State Super, has been one of the most active merger partners in the sector with $130 billion funds under management after merging with VicSuper, VISSF and WA Super in the past 18 months.
Meanwhile AustralianSuper chairman Don Russell, a former adviser to one of Australia’s super system architects Paul Keating, commended Hume and Jones’ bipartisan approach to improving the super industry.