2018: The policy outlook

08 February 2018

Parliament house in Canberra where policy changes occur
It’s never quiet on the policy and government relations front for the FPA. We take a look at the year that was and the year ahead for the profession.

Towards the end of last year, parliament was deep into the 2017 citizenship mess. The Deputy Prime Minister had been ruled ineligible to sit in Parliament and his seat of New England headed for a bi-election, which Barnaby Joyce comfortably retained.

And then there was our great Australian Davis Cup hero – John Alexander – who also resigned from Parliament due to being a British citizen. And that’s without considering all the resignations from the Senate.

The House sitting week, in which both MPs would definitely be missing, was ultimately cancelled due to the risk that the Nationals would cross the floor on the Government and vote for a Commission of Inquiry into banking to be set up.

The reason I bring this up is because at the time of me starting to write this, I was going to make the point that a Commission of Inquiry or an election (due to the Government losing its majority or to a change in leadership) were possibilities, which could have changed the political landscape – not that a Royal Commission was a certainty.

It was a little bit odd then that after I had written my first draft of this, sitting in a superannuation conference shortly after our own FPA Professionals Congress in Hobart, listening to two former Premiers discuss the importance of the superannuation system to Australia and seeing first that the banks had written to the Treasurer asking for a Royal Commission to be held, and then even more surprisingly, 20 minutes later, actually seeing it called.

Suffice to say that while the audience quickly became aware of what was happening – with hushed whispers and glances up to the stage to see when the presenters would be told – it was with great shock that the presenters learned of what had happened out in the world 30 minutes later, just as their presentation was concluding.

But here we are today, with the Government having asked the Governor General to authorise the Royal Commission into the alleged misconduct in Australia’s banking, superannuation and financial services industry and the Honourable Kenneth Hayne AC appointed as Royal Commissioner, in what I’m sure will quickly become referred to as the Hayne Royal Commission.

So, when I think about what work I was starting to plan out with the FPA Policy Team for 2018, our actual work plan will most likely now be significantly different.

And if 2017 is anything to go by – where we could safely say we would be working on the professional standards, education and life insurance frameworks, and a little bit of the 2016/17 Budget super measures left to implement – we ended up completing:

  • over 70 submissions;
  • five FPA white papers on the Professional Standards and Education Framework;
  • a member consultation of the new FPA Policy Plan;
  • mapping of the fintech industry to the financial planning process; and
  • conducted over 90 meetings with Government and regulators.

As you can see, 2017 was definitely not a quiet year for the FPA!

The big issue for the FPA for 2018 will obviously be supporting the Financial Adviser Standards and Ethics Authority (FASEA) where we can in setting the remaining professional and education standards.

While the entry standard for new (or provisional) financial planners has been set with FASEA’s acceptance of the Financial Planning Education Council (FPEC) curriculum and approved course list, we await the following:

  • the degree equivalence standard for existing planners;
  • the code of ethics; and
  • CPD, professional year and exam standards.

The FPA has put a lot of thought into these, through consultation with members, academics and the broader industry to develop the five white papers covering the standards. We are keen to help get the standards implemented and operational as efficiently as possible, and get on with the job of helping members transition their careers and practices into this new professional framework starting in 2019.

There will also be a large amount of work with ASIC to ensure the implementation of Code Monitoring bodies is completed in time for the 1 January 2020 start date.

Another big job for 2018 will be working on the implementation of the Australian Financial Complaints Authority (AFCA).

Merging the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT) is no small feat, particularly when the body that will become AFCA is required to be set up from scratch, while the existing bodies go through a wind down process.

The cost of this transition also has the potential to be substantial, and at a time when there are a number of other significant cost increases occurring.

Increasing regulatory costs for providing advice is also a critical concern for the FPA in 2018.

In 2017, we saw the introduction of the ASIC user pays funding model; we also expect AFCA to have new start up costs; FASEA will move to an industry funding model at some point; Tax Practitioners Board (TPB) registration costs; and the as yet unknown costs to meet the new professional standards framework, including additional education for some planners and the exam for all planners.

Professional Indemnity premiums will also come under pressure if the new EDR dispute limits are implemented. This comes at a time when there are also revenue pressures for many practices and the potential threat of automated product implementation tools.

Through 2017, the ASIC Enforcement Review has been conducting work to provide ASIC with additional powers around product regulation, new licensing powers, and both additional sanction and penalty powers and quantum.

The recommendations of this review are likely to be announced by the Government early in 2018 and a work program developed to implement them. This is an important piece of work, which will in particular give ASIC the power to intervene prior to consumer detriment occurring.

Finally, the FPA will continue to work with the Government to implement the Financial System Inquiry (FSI) recommendations around renaming general advice to product information, and reviewing the now 15-year-old retail/wholesale thresholds and definitions to better protect consumers. Naturally, the FPA will continue to recommend to Government that tax deductible fees for financial planning advice be introduced.

And if that wasn’t enough, we still have a lot of work to do to support members with understanding and implementing fintech tools into their advice process to make it more efficient and more engaging.

As I said above, this was the plan before we had a Royal Commission announced (and more citizenship drama). The Government has stated it intends to keep working on the above policies while the Royal Commission is on, so I can only expect things are only going to get busier in 2018 than we can even imagine today.

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