Five things you need to know - 2 September

By Drew Meredith

1) This week may well be remembered for decades to come as the point that the tide of regulation against advisers finally began to turn. The release of the interim Quality of Advice Review report was somewhat of a landmark for an industry inundated with paperwork, compliance, and financial pressures. Among the highlights was the recommended by Michelle Levy to replace the best interests duty and?statement of advice delivery?with a broad requirement to simply give ‘good advice’. While many have suggested it reverses long-held protections, any adviser at the coal face knows the compliance demands are far beyond what most clients can even understand.

2) It didn’t end at ‘good advice’ though with Levy highlighted the challenge that is unique to financial advice. That being, the statement and restatement of the same fee and services as many as four times in a 12-month period. Under the proposals, the opt-in, consent, and fee disclosure statement would be combined into a single, industry and platform accepted authority allowing the charging of fees. Extending this, statements of advice would not be required in their current form on the basis that they add little value to the end client and simply act to cover compliance basis and thus confuse those reading them. The opening of intra-fund and bank advice has drawn headlines but is clearly on the table. Read more.

3) Shifting to the sector more broadly, the long-discussed merger of the Financial Planning Association and the Association of Financial Advisers looks set to proceed. According to Tahn Sharpe, the rationalisation of the industry, the release of the Levy review, and the clear difficulty in having so many different voices for advice in Canberra were key drivers of the renewed and formal discussions. The merger would add 3,200 members to the FPA’s 10,000, both of which have faced pressure in recent years. The merger will be open to a period of consultation and ultimately a vote by the members of both groups. Read more.

4) Peter Costello couldn’t help but take a swipe at the industry super fund sector when delivering the Future Fund’s latest financial year performance update. Even one of the world’s best investors couldn’t avoid the losses in FY22, with the fund returning -1.2 per cent well below its objective of around 10 per cent. This of course is the challenge of inflation plus objective returns when inflation increases even for a short period of time. Costello flagged some concern around the ability of the major industry funds to announce returns just a few days after the end of the financial year when 30 June valuations of popular private market assets like Canva are only just feeding through in August. He suggested the return of the fund would have been positive 2.4 per cent if they applied the same approach.?

5) Finally, low-cost index fund manager has finally received approval for the launch of their retail super product in Australia. APRA’s rubber stamp will likely mean the product will be launched in November this year, placing significant pressure, particularly on price, on the corporate and industry fund sectors attracting default contributions. The manager of over $11 trillion globally vowed to ‘bring more choice’ to super and completes the evolution after the group gave back pension fund managers several years ago.