Financial advice reforms to add $130bn to super: report
Gillard government's reforms will boost retirement savings of Australian workers over 15 years.
Gillard government's reforms will boost retirement savings of Australian workers over 15 years. THE Gillard government's reforms to financial advice will boost the retirement savings of Australian workers by $130 billion over 15 years, according to new research commissioned by the not-for-profit industry superannuation fund sector.Industry Super Network, the union-backed sector's peak body, has used the report to attack claims from the for-profit sector that removing commissions for financial planners will destroy up to 35,000 jobs at a time when white-collar employment is already under severe pressure.The report, prepared by Rice-Warner Actuaries, updates a similar report on the government's Future of Financial Advice (FOFA) policy, prepared by the same firm in March 2010.While the earlier report predicted the number of financial advisers would plunge by 23 per cent in the 14 years following the abolition of fees, the new report predicts the number will be ''broadly stable''.The difference reflects the removal from the FOFA rules of bans on asset-backed fees and on commissions for insurance, which generate about 40 per cent of adviser revenue, Rice-Warner said in the report.''It's not that we've changed our minds, it's that there's been those two big changes,'' Rice-Warner director Richard Weatherhead said.Rice-Warner predicts that by 2026 FOFA will have boosted retirement savings by $130 billion, in today's dollars.''It's basically driven by the fact that if you've got a product with commissions coming out at the moment and that commission reduces, there's more in it,'' Mr Weatherhead said.By 2026, FOFA will slash adviser remuneration by $1.6 billion a year, Rice-Warner estimates.In parliamentary hearings last month, representatives of the for-profit sector estimated the reform package would slash 25,000 to 30,000 jobs from the finance industry.Claims that up to 35,000 jobs could be lost were described as ''silly'' by the executive director of Treasury's markets group, Jim Murphy, who told the hearing they were based in part on outdated assumptions contained in Rice-Warner's previous report. Rice-Warner now predicts the number of full-service advisers will drop by 3000 over 15 years, but this will be partly offset by an increase of about 2200 advisers offering piece-by-piece advice.Mr Weatherhead said Rice-Warner had not modelled the knock-on effect on backroom jobs of cutting adviser numbers. ''Given that ? you've only got a 5 per cent reduction over 15 years it's only going to be a small number anyway,'' he said.But he admitted Rice-Warner's modelling depended on advisers being legally able to offer advice on a piece-by-piece or ''scaled'' basis, rather than having to provide full-scale advice to every customer.
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