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Disclosure: It's not only FoFA that needs fixing

Wednesday, March 26, 2014

ICA has expressed concern for some time about the proposed ‘stepping back’ by the Australian government over investment advice disclosure rules. In this, we drew on the criticisms voiced by Alan Kohler, one of Australia’s most respected financial commentators. Here’s what he said in Business Spectator in February and, more recently, here and here.

The key issues relate to disclosure of commissions to financial advisers giving advice to retirees who (most frequently) are people managing their own Self Managed Super Funds. We favour strong disclosure requirements.

The Minister who had been organizing the ‘step back', Minister Sinodinos, has resigned for unrelated reasons. Finance Minister Mathias Cormann has taken over the role and released a statement explaining the proposed changes. However, he has also announced a freeze on the changes pending an extended period of community consultation. That’s sensible. We’d hope that consultation would include Alan Kohler.

What remains odd, however, is that so much effort is going into financial advisory issues. We rate this a much lower priority than disclosure reforms urgently needed in the compulsory superannuation sector. The lack of disclosure requirements for the big Industry and Retail superannuation funds makes them ripe for possible massive rorting and financial scandals down the road. Who knows if there’s any rorting occurring? No-one, because there’s no disclosure and transparency required by law.

We think that the Abbott government should give the highest priority to legislation to enforce disclosure and transparency on Industry and Retail superannuation funds. Why is it taking so long?

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