One central point is missing from the discussion about the federal government's proposed changes to the regulation of financial advisers. The best judges of the clients' best interests are the clients themselves. It's the clients' money -- not the government's. It's none of the government's business what arrangements clients and their advisers freely agree to. There's no problem with the government regulating to ensure transparency, but that's an entirely different matter from dictating what sort of financial advice clients are allowed to buy from their adviser and how they are to pay for that advice.
If a client wants to pay for their financial advice through instalments deducted annually from their superannuation account, the government has no role telling them they shouldn't be able to do so. Yet this is exactly what the government wants to do under the guise of its Future of Financial Advice reforms. Advisers will be forced to offer their services for upfront, lump-sum fees. All this will do is discourage people from going to see a financial adviser. Only 20 per cent of Australians use a financial planner, and this figure will now probably fall.
The suggestion that clients be forced to ''opt-in'' every two years to the advice they receive from their adviser is a classic example of nanny state paternalism. A basic practical problem is that of the paperwork burden and compliance costs of such a requirement. People should be free to opt in to advice for as long (or as short) as they like.
The supposed justification for these changes is that they are necessary to restore trust in the way financial advice is provided after the well-publicised failure of companies such as Westpoint, and Storm Financial. This is a furphy. The collapse of these companies were isolated instances and existing laws are more than adequate to deal with the consequences of their failures.
An unkind interpretation of the government's motivation for the introduction of these changes is that it's part of a broader agenda to advantage industry superannuation funds over the ranks of retail funds and self-employed financial planners.
Industry funds don't rely on commissions to the same extent as retail funds. Industry funds have their privileges enshrined in the industrial relations system, whereby if an employee doesn't nominate a preferred superannuation scheme the industry fund is the default option under industrial awards.
This admittedly cynical interpretation could have been allayed if, at the same time as the government had announced its review of financial advisers, it had announced a similar review of what retail and industry superannuation funds do. But it didn't. As was revealed last year in the research paper Keeping Super Safe, ''opaque'' is perhaps the best description for the level of disclosure from many superannuation funds. In a number of cases it is practically impossible to gain access to information about matters such as management fees and remuneration levels. And as yet no one has challenged government and superannuation funds on whether it is appropriate for funds to be investing in infrastructure projects, for example, at the behest of the government of the day.
It's not only the Gillard government that believes people can't be trusted with their own superannuation. Regulators have the same mindset. Last year Jeremy Cooper, who headed the inquiry into the superannuation industry, said he'd be worried if there were too many self-managed superannuation funds because as more people managed their own money there would be more people who didn't know what they were doing. If you thought it was a general objective of government and regulators to empower as many people as possible to manage and take responsibility for their own money, you'd be wrong. Cooper said: ''If you continue to increase the population [of trustees] so that it is more reflective of the population in general, I can see the model no longer working.'' The logical conclusion of that argument is truly frightening. If regulators are so worried about people not being equipped to make the right financial decisions about their future, then there's no logical reason to stop at super.
The decision of an individual to buy a house, for example, is potentially no less financially significant for them than how they manage their superannuation. On Cooper's reasoning we'd be banning those deemed ''financially illiterate'' from purchasing real estate or investing in shares or even running their own business.
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