This week, we have seen Parliament return for 2017. The new year offers an opportunity for a clean slate and to put the uncertainty of 2016 behind us.
Last year was marked by stops and starts, proposals and consultations, bills and budgets, and change upon change to the advice we provided to our clients. Uncertainty for planners, uncertainty for our clients’ financial positions. And let’s not forget – we even saw more changes to the Future of Financial Advice (FoFA) reforms.
This year, we hope, will bring much needed certainty to our profession.
While the frantic end to Parliament last year brought the 2016 Budget Super proposals passed into law, there were a number of changes and concessions made in the final package that had not been announced in the budget and taken to the election.
Even today, there is still uncertainty around the measurement of defined benefit schemes in the concessional contribution cap and transfer balance cap, the valuation of pre-July 1, 2017, commuted assets and whether there will be any improvement around the definition of super’s primary objective – which was meant to temper further tinkering with super by government – but may not achieve this aim, given the proposed objective.
So what will 2017 hold for financial planners and their clients?
The good news is that the government has this week quickly and efficiently passed both the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 and Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 through both houses of Parliament, unanimously and without amendment.
This is great news for financial advisory businesses, as they can start to plan their revenue streams for next year with certainty.
It also means the new standards-setting body – which will be made up of financial services experts, consumer representatives, both an education and ethics specialist, and an independent chair – can now be set up and commence the task of building the components needed to professionalise the whole advice community.
Standards body will be busy
This process will involve building a curriculum for approved degrees for new entrants from 2019, so we can move past diplomas as the minimum entry requirement for financial planners. It also involves designing the professional year for new entrants into our profession from 2019 so they can be mentored and coached to gain the technical, compliance and, most importantly, soft skills required to be a professional financial planner.
The standards-setting body must:
- Provide a clear CPD policy for the whole profession from 2019 that can resolve the confusion over hours and points, and conflicting professional association CPD/E requirements, while increasing the focus on ethics in ongoing education.
- Raise ethical standards with a compulsory code of ethics and code-monitoring bodies run by professional associations from 2020 to improve consumer trust and confidence in financial advice providers.
- Set an exam that all financial planners will need to pass by 2021 to ensure a strong understanding of compliance and ethical obligations.
- Create an assessment criteria for existing financial planners who need to transition to degree equivalence status by 2024 that can take into account all formal study, professional certifications and specialisations and CPD completed over their financial advice careers.
The passing of the Professional Standards and Education Framework also enshrines the terms ‘financial planner’ and ‘financial adviser’, so consumers know they can trust the professional they are sitting in front of, rather than worrying they are sitting in front of someone who is just trying to rip them off and flog them a product.
Another exciting development we are expecting to see this year is the introduction of the new MyRetirement Products framework – formerly called comprehensive income products for retirement – which will introduce a way for innovative new retirement income solutions to be developed that can help secure the needs of our clients.
Other issues we may see the government deal with this year include the business tax cuts that were blocked last year, ASIC’s new funding model and new regulatory powers around product design, plus changes in the external disputes resolution space, with the possible introduction of a compensation scheme of last resort.
Despite the clarity that usually comes with an election, we will also need to see what budget 2017 holds for our clients.
While all of that may seem like a lot, it is significantly less than the change program we saw in 2016, and beyond this, the government has pledged a commitment to stimulating business, trade policies and strengthening boarder protection. This agenda focus gives us hope that 2017 will be a year of fewer changes for planners, allowing us to get on with providing great advice to Australians and to help them build a better financial future – as well as a little bit of business planning.
