I’ve been trying to avoid a cliché about 2018 being a “big year” for financial advice, but how can I?
With the industry under heavy scrutiny during (and after) the Royal Commission, multiple reforms affecting advisers flagged by ASIC – including this one, this one and this one – and a crackdown on SMSF tax treatment by the ATO, one can be forgiven for struggling to keep up. And that’s not even going into the new FASEA standards that kick in next year.
Towards the end of 2018, there seems to have been some solidification in how the advice industry will need to operate in the future, but there’s a lot that remains to be seen.
Consultation for FASEA's relevant providers degrees, qualifications and courses draft legislative instrument closed on Friday. It likely won't be too long after that that we'll see what these definitions will look like when signed into law. But at this stage, even if the education pathways spelled out in the FASEA standards seem pretty close to finalised, there's still room for change.
Furthermore, notices have been sent to advice industry associations instructing them how to have the course content for their professional designations approved by FASEA. The standards authority said it was important that all associations with professional designations submit their course content "as soon as practicable" to make sure advisers with a relevant designation are eligible for up to two units credit in their study.
The next election will take place in May. Even though a Shorten government seems to be the likely outcome according to multiple polls, it’s also possible (if improbable) the LNP will retain power.
It’s no secret that Labor leadership regarded the Royal Commission as inadequate in addressing the needs of affected consumers, which is why it’s been conducting its own series of roundtables to hear out people’s concerns. This may well have an impact on how a Shorten government tweaks, if at all, how advice is treated from a regulatory perspective.
There’s also, of course, Labor’s controversial proposal to axe cash refunds for excess imputation credits, which Shadow Treasurer Chris Bowen said would “save the budget $11.4 billion over the forward estimates from 2018-19, and improve the budget bottom line by $59 billion over the medium term.” Labor would also introduce a “pensioner guarantee” to ensure those receiving a government pension or allowance would still receive the cash refund.
While the overall impact on the Australian economy is unknown at this stage, the SMSF Association in particular has come out strongly against the proposal, writing a letter stating that it would “severely damage the retirement plans of many Australians who have prudently saved for retirement through an SMSF and planned for refundable franking credits.”
We still have no idea what recommendations are contained in the Royal Commission final report. There may be wide-ranging proposals made to reform the financial services industry, and we’ll have to wait until early next year to find out what they are.
You can read our rundown of the issues identified in the interim report here, but as a summary: it identified a greater need for separation between the manufacture of financial products and the provision of advice; asked whether financial product sellers and manufacturers should ever be permitted to provide advice to retail clients; and, perhaps most significantly, suggested ASIC may soon be responsible for licensing every single adviser, even those now acting as authorised representatives of a licensee.
We’ll have a clearer picture of how the above three questions are answered in the coming months, but until then – we’ll keep you posted.
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