Financial planners will no longer be grouped with used-car salesmen if new reforms get through parliament, federal Financial Services Minister Bill Shorten says.
Financial planners will no longer be grouped with used-car salesmen if new reforms get through parliament, federal Financial Services Minister Bill Shorten says.
Although the proposed laws have their critics in the industry, a lot of go-getter financial planners are championing the reforms to turn their image around, Mr Shorten says.
"We expect that on balance this will lead into Australians seeking more financial advice, which will ultimately see a maturing and a professionalisation and a growth in the industry over time," he told reporters in Sydney on Thursday.
"The industry demonstrates it's serious about being perceived as more than a group of retail cowboys who have fallen into being the financial services version of used-car sales people, which they're not, but there is that perception of elements of it.
"They recognise that if they want to become a profession, then they've got to act like a profession."
Among the main improvements in the Future of Financial Advice reforms is a requirement for financial advisers to get clients to opt in every two years if they wish to continue receiving advice.
The federal opposition expressed concern at this, saying the opt in requirement would place added cost burdens on small financial advisery businesses and that it would mean the government is pandering to unions.
Industry Super Network, the lobby group for union and industry super funds, had wanted an annual opt-in period while the Financial Services Council, which represents retail super funds and larger wealth funds, was pushing for a three-year gap between contracts.
The coalition's assistant treasury spokesman Mathias Cormann said Mr Shorten was favouring industry super funds.
"Obviously, the minister is very close to players in that part of the industry. It's important for the minister to act in the public interest and not the vested interests of his union friends."" Senator Cormann said.
While The Self Managed Super Fund Professionals' Association (SPAA) was largely in support of the recommendations, it expressed concern with the opt in recommendation.
"SPAA does not believe an opt-in arrangement is required for financial advice in SMSFs and believes the
Government should wait to see what effect the banning of commissions and volume payment changes
have on the market before considering the introduction of these measures," SPAA chief Andrea Slattery said.
Other reforms include banning all commissions on risk insurance inside superannuation and a broad ban on volume-based payments.
The FPA said it was specifically concerned about the proposal to ban insurance commissions inside superannuation and the plan to require clients to opt into financial advice every two years.
"Getting the detail right will have a significant impact on the success of the reforms, and the FPA looks forward to providing input in this next stage," FPA chief executive Mark Rantall said in a statement.
The Financial Sector Union was in support of the recommended changes, saying "It is clear from the Government's announcement that they have signalled the death knell for conflicted remuneration in the finance industry"
The Joint Accounting Bodies which represents CPA Australia, Institute of Chartered Accountants in Australia and the National Institute of Accountants said the introduction of the opt in requirement and an annual disclosure statement would ensure the client advisor relationship is transparent.
Association of Financial Advisers was condemning of the recommendations and said the reform package will impose higher costs on consumers, impede their access to advice, tie them up in red tape and create even greater confusion in the industry.
Graham MaCaulay, who lost half his retirement savings in the collapse of property group Westpoint in 2006, says his financial planner did not disclose all the information.
He said the reforms were a step in the right direction.
"It's a big step forward to try and bring the financial planning industry into something that makes them not just a means of gathering money for themselves but actually performing a useful function, because most of the mum and dad investors, they don't know a debit from a credit," Mr MaCaulay told reporters.
Westpoint failed in 2006, leaving 4300 mum and dad investors $300 million out of pocket.
Unions and consumer groups have also welcomed the reforms, but the Financial Planning Association (FPA) says it wants to examine the package in fine detail.
Unions NSW Secretary Mark Lennon said the federal government's clean-up of the financial advice industry was a win for workers.
"We've seen too many cases where retirement savings have been eroded by unnecessary fees and commissions," Mr Lennon said.
"Should this legislation pass the parliament, it will give everyone greater confidence in superannuation and the financial advice industry broadly."
Consumer group Choice said the laws were a "very significant" step forward but warned the support of parliament was needed to ensure the reforms became law.
