What Now?

Australians have literally been left hanging after the weekend’s federal election delivered Australia’s first hung parliament since 1940.

The outlook for the financial services industry is now more uncertain than ever. Negotiations with the powerbrokers that hold the nation’s fate in their hands are in the early stages, but any minority government will find it difficult to pass policy and the proposed industry reforms could subsequently remain at a standstill for some time.

While both leaders spent the election campaign fighting over middle Australia, many of the key issues facing Australians went largely ignored.

Acutely aware they were walking a tightrope; neither Gillard nor Abbott was game enough to take a real stand on the issues that matter – arguably one of the reasons Australians were ultimately split over who should lead the country.

One area, however, where the views of the major parties differ considerably is that of superannuation and financial advice.

The shape of the financial advice and super industries could be vastly different depending on which party is successful in forming government.

The Labor party has made it clear that, if re-elected, it will raise the Superannuation Guarantee to 12 per cent, introduce MySuper and ban commissions on superannuation and investment products.

It is even considering banning commissions on insurance products – a move that is largely opposed by the financial services industry in fear that it will exacerbate Australia’s underinsurance problem.

The Liberal party, on the other hand, has pledged no change to the 9 per cent SG, saying instead it would use tax reform to increase people’s savings.

The Liberal party says SuperStream “and any other measures which deliver greater efficiency” are worthy of further consideration but has noted concerns raised by the industry about the cost of implementing MySuper and ‘choice architecture’, and says the recommendations do little to reduce the lack of competition in the super sector.

Shadow Treasurer Joe Hockey reiterated at the recent Financial Services Council (FSC) conference in Melbourne that the Liberal party did not support a blanket ban on commissions, adding that some people could not afford to pay an upfront fee for advice.

Much of the talk in the financial advice industry has focused on the implications of a fiduciary duty for financial advisers – one of the recommendations to come out of the Cooper review – as well as the requirement for financial planning clients to ‘opt-in’ on an annual basis.

At the FSC conference, Colonial First State’s GM of Advice Business, Paul Barrett, talked about the need to lift the barriers to entry to the industry and move from a “culture of cure” to a culture of prevention.

Financial Planning Association CEO Mark Rantall spoke of his vision for financial planners to be regarded as a profession by the broader community – a perception that most people would agree does not currently exist.

Whatever the outcome of the weekend’s events, advisers and super funds could face another 18 months of limbo: a state which they are quickly becoming accustomed to, but which will do little for consumer confidence.