Good afternoon.
It's great to be here in Melbourne for this Financial Advice in Super Symposium. I'd like to thank Industry Super Funds for the invitation to come and take part.
Let me acknowledge Industry Fund Services Chief Executive Office Bill Danaher, Industry Super Network Chief Executive David Whiteley, as well as my fellow panel members Robbie Campo from ISN, the Member for Bradfield Paul Fletcher, and ASIC Commissioner Peter Kell.
Before we begin our panel session, I'd like to say a few words about how MySuper, the Superannuation Guarantee, and the Future of Financial Advice reforms will affect the provision of financial advice by super funds.
Superannuation
As Australia's population ages, superannuation is becoming increasingly important to our community.
This is why the Gillard Government's reforms are all about promoting the best interests of members.
As you know, under our reforms, a new simple, low cost, default superannuation product called MySuper will commence from 1 July 2013. In relation to the provision of financial advice through superannuation funds, the Government's Stronger Super and MySuper reforms stipulate that funds can't charge members collectively for financial advice, other than for intra-fund advice. Members seeking complex personal advice must bear the cost of that advice.
Recognising it's appropriate that super funds continue to provide intra‑fund advice to their members, funds will be able to charge collectively across their membership to cover the cost of that advice.
Intra-fund advice is a type of scaled advice, defined as simple advice provided by superannuation fund trustees to fund members in relation to their holdings. Intra-fund advice is subject to the Future of Financial Advice or 'FoFA' reforms — including the 'best interests' duty and ban on conflicted remuneration.
The new rules on providing intra-fund advice, together with the FoFA reforms, will ensure that members of superannuation funds have access to simple, low-cost financial advice about their retirement savings.
More broadly, it's encouraging to see the superannuation industry embracing the Government's MySuper reforms, and in some cases, offering new innovative, simple and cost-effective products. These products will ensure that members get a fair deal when saving for their retirement.
And of course, the superannuation industry itself plays an essential role in helping to educate the community about superannuation law. This role will continue to grow as the Superannuation Guarantee or 'SG' increases from its current level of nine per cent to 12 per cent by 1 July 2013, boosting retirement savings for 8.4 million Australians.
Superannuation is becoming an increasingly important financial asset for many Australians. Substantially increasing the superannuation balances of Australians by increasing the SG means that, over the longer term, more Australians will potentially engage with their superannuation and seek intra-fund advice.
The FoFA reforms complement this key change in the superannuation system by ensuring that superannuation funds provide intra-fund advice that is in the best interest of their members.
For example, advice will be better tailored towards the needs of members because it will be free from the conflicts of interest that can occur when financial planners accept payments that could influence their advice.
The new rules on intra-fund advice will also mean that the cost of more complex advice provided to members cannot be spread across the general membership of the fund. This means that disengaged members will not have their retirement savings eroded by unnecessary fees. As well, in line with the Stronger Super recommendations, the Government has announced that it will exempt intra-fund advice fees from the FoFA adviser charging regime.
Future of Financial Advice
I'd now like to talk in a bit more detail about the Future of Financial Advice or 'FoFA' reforms…
As I'm sure you are aware, the reforms became law on 1 July 2012. To allow the financial services industry time to transition to the new regime, the reforms will be voluntary until 1 July this year.
The FoFA reforms will deliver major benefits to all Australians, enhancing consumer confidence and protection, and driving an increasing level of professionalism in the industry.
While FoFA has attracted some criticism, I'm pleased that the vast majority of the industry has already moved to adopt the reforms if they weren't already meeting it. I'd like to acknowledge and thank the industry for its support for the changes, and I'm glad we've been able to work together throughout the process.
The Government believes that the post‑FoFA industry — an industry in which advisers act in the best interests of their clients and don't receive conflicted commissions — will be well-placed to meet the increasing need for quality financial advice demanded by an ageing population.
The FoFA reforms represent the Government's response to the Parliamentary Joint Committee on Corporations and Financial Services (or PJC) inquiry, which I chaired in 2009.
You'll no doubt remember that the PJC inquiry looked into the issues surrounding the collapse of Storm Financial, Opes Prime, and other firms.
The inquiry's report found there was a case for a series of carefully considered recommendations to enhance consumer confidence and protection, and enhance professionalism within the sector.
But despite the bipartisan nature of the initial Parliamentary inquiry, the Opposition did not support the reforms in Parliament. In fact, there were 12 divisions on the issue of conflicted remuneration alone.
I'm proud that it was a Labor Government, with support from the cross-benches, which delivered these reforms. This will ensure that the future retirement incomes of hard-working Australians are protected, and the continuing professionalisation of the industry is supported.
The Government's agenda for 2013
The bulk of the FoFA reforms have been implemented through legislation, but the Government continues to work with industry on several related issues.
I'd like to briefly outline these…
On 28 November last year, my Parliamentary colleague Bill Shorten, the Minister for Financial Services and Superannuation, released draft regulations to deliver on the Gillard Government's commitment to replace the accountants' licensing exemption in the FoFA regulations with a new form of limited licence.
This will enable accountants and other licence holders to provide advice on self-managed super funds and superannuation, as well as 'class of product' advice on a range of financial products. The consumer protection provisions of FoFA, such as the 'best interests' duty, will also apply to the limited licence.
This reform will expand access to financial advice and better protect investors.
At the same time as he released the draft regulations to establish the new limited licence, Minister Shorten also released draft amendments to the Corporations Act to ensure that only persons who are authorised to give personal financial advice to retail clients can represent themselves as a 'financial adviser' or 'financial planner'.
By implementing this reform, the Gillard Government recognises how important it is for consumers to have trust and confidence in their financial planners and advisers.
We are currently considering responses to the draft legislative changes on the limited licensing arrangements and definition of financial planner, and intend to introduce legislation into Parliament before 1 July this year.
Conclusion
In closing, I mentioned earlier that the FoFA reforms will transform Australia's financial advice industry. In many respects, this has already happened. And while government has played a guiding role in this process, it is ultimately you the sector that has driven this cultural change.
At the same time, this transformation has also presented significant implementation challenges for the regulator.
I'll let Peter [Kell] talk about ASIC's implementation of FoFA in more detail. But I just wanted to underscore the Government's appreciation of ASIC's work to date and its constructive approach in engaging with industry on the implementation of these important reforms.
Thank you again for the opportunity to come and speak with you today. I'm looking forward to hearing from both Peter and Paul, and taking a few questions afterwards.