Assistant treasurer Josh Frydenberg has suggested the government will not provide unconditional support for John Trowbridge’s recommendations around life insurance advice remuneration.
“I’m sympathetic to some of the points made by the smaller players in the sector that some of the bigger shops could cross-subsidise their advisers in a way smaller insurance advisers couldn’t.
“Again, we have to weigh all that up, and that’s why the industry should be able to lead with a common response,” Frydenberg told Professional Planner on the sidelines of a joint Financial Services Council (FSC) and BT Financial Group event.
He was asked whether the government is prepared to back Trowbridge’s recommendations, despite the overwhelmingly negative response from risk advisers and concerns over a lack of transparency within the submission process. “I’m saying they’re worth consideration, that’s as far as I’ve gone,” Frydenberg said.
“It is encouraging to see industry taking responsibility for these issues and acknowledging that the status quo is no longer viable. Appropriate reform, made as soon as possible, must be led by the industry itself. Industry should not force the heavy hand of government to act,” he said.
This was a theme repeated throughout his address to the gathering: that the government much prefers a co-regulatory response rather than a prescriptive government one.
“The Government will be a willing reform partner with the industry provided the industry is prepared to adopt genuine solutions to the issues identified in ASIC’s report,” Frydenberg said.
Read an edited transcript of Josh Frydenberg’s speech.
FPEC details kept under wraps
He also spoke about the consultation paper his office has released on the Parliamentary Joint Committee on Corporations and Financial Services (PJC).
“I have given very clear direction that I’d like to see reform in this area, and that will involved a large range of potential changes including an entrance exam, a supervisory year, code of ethics and professional association membership [as part of] quite a significant change for the sector,” Frydenberg said.
However, he acknowledged the need for changes to be ushered in according to an appropriate timeline. “We would need an appropriate transition arrangement. The average age of a planner is 55, so you have to take that into account.”
Declining to elaborate on details about how the proposed Financial Professionals’ Education Council (FPEC) would be structured, Frydenberg said: “Let’s not get ahead of ourselves, let’s see where the stakeholder consultation goes. That would have a role in standard setting.”
Frydenberg said he is waiting until the consultation period ends on May 7 2015 before providing further information.
Regarding any crossover of responsibilities between the proposed FPEC and the Australian Securities and Investments Commission (ASIC) he said: “We’re not looking at diminishing ASIC’s role, we’re looking at how we can boost professional standards and ethics in the sector, because clearly the status quo is not viable.”
“We can do that by creating these new educational councils, these new bodies, and how they interact with ASIC is still to be determined. Again, this is why we’re having the consultation process.”
