Parliamentary committee wants to lift financial advice standards

Superannuation Legislation, Acts and BillsA joint parliamentary committee has commenced investigations into ways to lift the professional and educational standards of financial advisors.

The joint parliamentary Committee on Corporations and Financial Services is looking into proposals to “lift the professional, ethical and education standards in the financial services industry”.

This inquiry follows from a recommendation by the Senate Standing Committees on Economics into the performance of ASIC:

“Recommendation 54
The committee recommends that the Parliamentary Joint Committee on Corporations and Financial Services inquire into the various proposals which call for a lifting of professional, ethical and educational standards in the financial services industry.”

The committee also recommended that financial advisers hold, at least, a relevant university degree and have three years’ experience in a fiver year period – in addition to continuing professional development among other requirements.

This investigation by the Parliamentary Committee has received support from the FPA, with the CEO Mark Rantall saying that it will, along with the public register of financial advisers, “help advance the profession of financial planning”.

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Consultation to begin on public register of financial advisers

Consultation on public register of financial advisersThe Government has announced a dedicated industry working group to consult on the establishment of a public register of financial advisers.

This was part of the deal the Government made with the Palmer United Party to secure the votes to stop the FoFA change regulations being disallowed by the Senate.

As stated in the letter from Acting Assistant Treasurer Mathias Cormann to Clive Palmer, also stated in the media release following the vote:

“the Government will work in consultation with all relevant stakeholders, to establish an enhanced public register of financial advisers (including employee advisers), which includes a record of each adviser’s credentials and status in the industry.”

This part of the deal appears to be outside the 90 day limit on some of the other conditions, leaving more time for consultation.

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APRA super funds underperform investment benchmarks

APRA industry/retail super funds best return 2013/14 - Telstra Super, investment benchmarksAccording to data published by SuperRatings, APRA regulated super funds fell short of the relevant benchmarks for investing in Australian and international shares in 2013/14.

Recently published rankings of APRA-regulated Industry and Retail funds by SuperRatings shows that Telstra Super had the best performing ‘balanced investment option’ in the 2013/14 financial year, with 15.8%. Second place was held by Intrust Super at 14.0% and Unisuper and Australian Super tied for third at 13.9%. This compares to the median for a balanced option of 12.7% over the same period.

However, as noted by SuperRatings founder Jeff Bresnahan, the returns over a longer period are much lower, “over a 22 year period since the introduction of compulsory superannuation, Australian funds have returned 7.2% per annum”.

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Government considers ways to improve income streams

Retirement Income Streams - deferred lifetime annuities (DLAs) and minimum pension draw-down paymentsThe Government has released a discussion paper which raises the option of changes to the minimum annual pension payments and the introduction of new types of income streams to improve incomes in retirement.

With the release of the discussion paper, Review of Retirement Income Stream Regulation, Acting Assistant Treasurer Mathias Cormann says the Government is delivering on the election commitment to “review regulatory barriers restricting the availability of retirement income stream products”. At a time that “Australians are looking for more options to better manage their retirement income” Cormann says that the Government wants to “encourage greater product innovation” in retirement income streams.

The Financial System Inquiry panel also seems to be thinking in similar directions, given the following observation was made in the interim report:

“There are regulatory and other policy impediments to developing income products with risk management features that could benefit retirees.”

The focus of the reforms the Government is considering seems to be changes to the minimum annual pension payments the introduction of Deferred Lifetime Annuities.

Minimum Annual Pension Payments

One option to raised in the discussion paper is the change the minimum annual pension payment requirements of account-based pensions – the currently 4%-14% minimum that needs to be withdrawn each year in order to meet the conditions of a pension.

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ATO points to emerging risks for SMSFs

Australian Taxation Office - ATO SMSF emerging risksThe ATO Assistant Commissioner with responsibility for SMSFs, Matt Bambrick, has highlighted emerging risks that concern the ATO in the SMSF sector.

The speech, Update from the ATO on recent compliance activity, areas of concern with SMSFs and the ATOs future priorities, was given to the CPA Learn from the Masters SMSF Conference and Expo 2014.

SMSF Overseas Seminars

The ATO is concerned about promotors advertising “questionable SMSF conferences in overseas destinations”. It appears these seminars may be of limited value to the SMSF as they include “minimal training related to SMSF activities”. However the promotors claim the that the full costs of the trip can be claimed as a tax deduction. The ATO warns that:

“Trustees contemplating attending such events should be aware of the potential to contravene the sole purpose test.”

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Only 62 applications for accountants limited AFSL says ASIC

ASIC accountant limited AFSLs, SMSF auditor, compliance actionASIC has received only 62 applications from accountants for limited AFSLs up to the end of May, 7,500 people have been registered as SMSF auditors and ASIC is concerned by advertising of SMSFs and property promotion.

These are some of the things to take from the speech, The Regulator’s Perspective on the Regulation of SMSFs, that the Commissioner of ASIC, Greg Tanzer, recently gave to the CPA Australia SMSF Conference 2014. Addressing the accounting body Tanzer said:

“We think that accountants and other gatekeepers have a critically important role to ensure that:

  • at an individual level, only those investors for whom an SMSF is suitable go into the SMSF sector and, in doing so, they are fully informed, and
  • at an aggregate level, the overall health of the SMSF sector is sound ”

Accountants Limited AFSL

Tanzer revealed a number of interesting statistics which show the lack of take-up of limited AFSLs by accountants, between 1 July 2013 and 27 May 2014:

  • ASIC has received only 62 applications for limited AFSLs
  • Only 27 limited AFSLs have been approved
  • One application is likely to be refused
  • 25 applications have been withdrawn or returned as they are “materially deficient in respect of the documentation and information which had been submitted in support of the application

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FSI interim report: what it means for SMSFs & Superannuation

Financial System Inquiry (FSI), Murray Inquiry - SMSFs, Superannuation, Retirement IncomeThe Financial System Inquiry (FSI), also called the Murray Inquiry, has released the interim report – pending further consultation before the final report. The interim report is broad, though contains a number of concerns and issues facing the superannuation system and how it supports providing retirement incomes.

Financial System Inquiry – SMSFs

The FSI is concerned about several aspects of SMSFs:

  • the high operating expenses of many SMSFs
  • if there should be limitations on establishing an SMSF
  • reintroducing the prohibition on borrowing

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