The Government’s Reform Priorities for the Financial Services Sector

THE GOVERNMENT’S REFORM PRIORITIES FOR THE FINANCIAL SERVICES SECTOR

EXECUTIVE SUMMARY

During his address at the Financial Services Council Annual conference, the Hon Josh Frydenberg MP, Assistant Treasurer, has provided details of the Government’s progress to date and priorities regarding the financial services sector.

No great surprise or detail provided, but a good overview of where things are at.

PROGRESS IN THE FINANCIAL SERVICES SECTOR (RELEVANT TO INSURANCE)

Future of Financial Advice (FOFA) Refinements

  • In June the Government announced that it had agreed with the Opposition to progress minor and technical refinements to the FOFA laws to alleviate a number of unintended consequences and make FOFA consistent with other parts of the Corporations Act. [Little or no impact on the general insurance space as merely clarifications]

 

  • He noted that FOFA “should now be considered settled and given time to work”.

Financial Systems Inquiry

  • After extensive consultation with industry and consumer groups on their thoughts and priorities for the sector, particularly in relation to the FSI recommendations the Government is now considering the views of all stakeholders before responding to the FSI, which it is expected to do shortly.

 

The Register of Financial Advisers

  • In March, the Government launched an industry-wide register of financial advisers which now includes more than 23,000 advisers and has had over 233,000 searches.

 

  • The Government is now considering possible enhancements and will continue to seek feedback from all stakeholders on how the register can be improved.

 

ASIC Capability Review

  • The Government has commissioned a review to consider the capabilities of the ASIC to ensure that ASIC has appropriate governance, capabilities and systems to meet its objectives and future regulatory challenges.

 

  • The review is to be completed by the end of 2015 and will consult extensively with private sector businesses regulated by ASIC and peak bodies, as well as regional and consumer representatives.

 

 

 

 

THE GOVERNMENT’S REFORM PRIORITIES (EXCLUDING SUPERANNUATION)

Professional Standards

  • Increasing professional, educational and ethical standards in the financial advice industry to boost public confidence through an enduring framework that raises the professional standards of advisers.

 

  • The Government has received over 50 submissions in response to the consultation paper on this issue and the Government is close to finalising its approach and seeking to achieve a broad consensus and bipartisan support in Parliament. Further update to be issued by Government after release of Government response on FSI.

 

Life Insurance

  • In light of the findings from three independent and Government reports in this area, reforms were needed to improve consumer outcomes and remove incentives for inappropriate policy replacement. Government called on the industry to take the lead on reform before the Government was forced to do so.

 

  • In June, the Association of Financial Advisers, the Financial Planning Association of Australia and the Financial Services Council put forward a reform package to the Government on behalf of the retail life insurance industry.

 

  • The Government is considering industry’s proposals as part of its response to the FSI and in particular:

 

  • Implementing the proposals will require ongoing cooperation;

 

  • Industry, along with the Government, continues to flesh-out the detail of this package and while there is considerable detail to be finalised, the Government will not lose sight of the end objective; better outcomes for consumers.

 

This objective includes an expectation that where substantial savings are generated from the reforms, these would be passed-on to the consumer. Government is currently exploring additional mechanisms to support this principle.

 

  • Government is conscious of the challenges posed by industry reform of this scale, and advisers are looking to life insurers to help them transition and navigate these significant reforms.

 

  • Government will have more to say on the role the Government will play in this process following its response to the FSI.

 

FOR FURTHER INFORMATION

The Hon Josh Frydenberg’s Address at the Financial Services Council Annual Conference