This is no theoretical question. The industry has been heading down implementing the ALP’s reform agenda for the past several years, at the expense of much else. It had better look up, because the Coalition’s priorities are likely to be very different.
Some won’t be known until the financial services inquiry, which now includes super. The best known changes include the Coalition’s policy to cancel the low income super contribution scheme.
Putting aside equity issues, these won’t have a huge effect on the industry. They will slow the industry’s growth rate, but only at the margin.
More far-reaching impacts are likely to come from action - or inaction - in other areas:
- SMSFs: the Coalition is likely to be friendlier to self-provision in super (not that the ALP was exactly unfriendly to SMSFs). If anything, the already limited constraints on SMSFs on issues such as collectibles may be loosened further.
- FOFA: the Coalition has committed to easing the burden of FOFA, but how far will it unpick things? It’s expected that opt-in will go, but the interesting part will be whether the conflicted remuneration and grandfathering provisions are rolled back.
While the removal of conflicted payments was an important achievement, FOFA has also created some industry distortions (such as making it difficult for financial planners to move). Wealth management has also become an industry – pretty much the only industry - where it has become effectively illegal to pursue a sales career.
These may sit uneasily with the Coalition. A significant roll-back of FOFA would be a shock for a retail industry which has just spent many millions on implementation, but it cannot be ruled out.
- Post-retirement: expect changes to tax and other regulations which permit deferred annuities and other retirement products found in overseas markets to be offered in Australia. This still leaves the problem of finding a good balance sheet to back them – especially if volumes really ratchet up.
Much will depend on the eventual make-up of the Senate of course, which looks like it might be interesting. But expect this to be a de-regulating government to the extent that it can. That will be a different experience to the recent past – a relief for retail, a more challenging environment for not-for-profits.
Andrew Baker is managing partner at Tria Investment Partners. To see the full version of this post, plesae click here.