(03) 9020 2905All backsides deserve to be kicked occasionally. If they misbehave and poke themselves out … army boot, raised to 3pm, swung swiftly with torpedo punt follow through all the way to 11pm.
Companies need it regularly for greedy decisions. Say, Westpac and the Commonwealth Bank for raising interest rates way above the Reserve Bank’s moves in recent years.
Individuals deserve it too. The High Court thumped Immigration Minister Chris Bowen’s butt so hard over the Malaysian equation that he might not want to sit down for months. (“Dang! Where’d we put those keys to Nauru?”)
Occasionally, governments need kicks because they’ve got old, lazy and arrogant. That weirdness of having a NSW premier with an American accent is a problem no longer.
Please, when it’s my turn, don’t let the punisher be Sav Rocca. The former Magpie full-forward has an even bigger follow through now as an American NFL punter.
All too often, it’s an industry that deserves some size 12 bootlaces for end-of-season footy trip behaviour.
Troublemaker: the financial services industry, including banks, insurers, fund managers, licensees and advisers.
Offences: Storm Financial, Opes Prime, Westpoint, Trio, Great Southern, Timbercorp, Chartwell, Lift Capital, MFS …
Butt-kicker: Bill Shorten, Assistant Treasurer and Minister for Financial Services. Ex-union tough guy.
Shorten made the financial services industry aware that it was in for a hip’n’shoulder bump into the new millennium.
Earlier this year, Shorten announced his “Future of Financial Advice” package, a series of heavy-handed reforms to further professionalise the industry. The industry didn’t think more regulation was needed. Intense back-room lobbying of the “Yes, Minister” kind ensued.
Shorten listened. He continued with the thrust of his plans, but where compelling arguments were made, he modified his proposals.
So, what’s happened? What’s changing? And what should you do?
The biggest change is called “opt-in”. Financial advisers will have to get approval from clients every two years to continue charging a fee. Shorten originally wanted every year.
Your adviser will need your permission to continue charging a fee. If you say “no”, they have to switch the fee off. (If they don’t, it could cost them up to $50,000.)
Advisers will also have to work in their client’s “best interest”. You’d think this would be a no-brainer, but it will push some people out of the industry. And regulator ASIC now has further powers to ban advisers.
“Conflicted remuneration”, including commissions, soft dollar payments and volume bonuses, will also be removed or heavily restricted.
Existing arrangements will, however, be “grandfathered” because Shorten’s legal advice said ripping up existing contracts would be disastrous.
Shorten’s biggest backdown was in relation to commissions for insurance inside super. He had planned to ban it completely, following a (flawed, in my opinion) recommendation from Jeremy Cooper’s Super System Review.
Banning commissions inside super, and not outside, would have created fresh conflicts of interest for advisers (and would have cost consumers more).
Do they recommend insurance outside where they can get a commission, even if it would be in the best interest of the client to have their insurance inside super? Both decisions are easily justifiable for an adviser.
So, what should you do?
If you need financial advice, don’t put it off until the changes come in next year.
As consumers, you have the ultimate power. You can renegotiate your arrangement with your adviser at any time, including after the new regulations come into force. And you can take your business elsewhere.
These changes are not earth-shattering. They are incremental to making the financial services industry more professional and moving it towards fee-for-service, as previous changes have also.
Overall, however, this will push up the cost of financial advice – increased regulation inevitably does.
*****
Former Prime Minister Kevin Rudd’s dud First Home Savers’ Account concept is dying a completely foreseeable, if drawn out, death.
The aim of FHSA was to give young Australians a low-tax environment to save for their first home. But the restrictions imposed on the accounts meant that it was almost pointless and could, actually, be harmful to your finances.
Now, the nation’s largest lender, the Commonwealth Bank will no longer offer FHSAs. Due to lack of interest. Oh, I’m surprised, like finding out the truth about the tooth fairy.
The government estimated 400,000 people would use FHSA. Less than 7 per cent of that figure did.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au .