Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Financial Regulation

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<img src="https://counter.theconversation.edu.au/content/65328/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Banks may still be evading increased regulation by shifting activities to shadow banking. This system is well established as part of the financial sector, but it provides products that separate an investor from an investment, making it more difficult to evaluate risk and value.
This lack of transparency increases the risk in our financial system overall, making it vulnerable to the types of shocks that caused the 2008 global financial crisis. A current example is the so-called “bespoke tranche opportunity” offered by shadow banks. This is similar to the notorious collateralised debt obligations, packages made up of thousands of mortgage loans some of which were sub-prime, blamed for the global financial crisis.
Shadow banking is comprised of hedge funds, private equity funds, mutual funds, pension funds and endowments, insurance and finance companies providing financial intermediation without explicit public liquidity and credit guarantees from governments. Shadow banking is usually located in lightly regulated offshore financial centres.
In the period leading up to the global financial crisis, a large portion of financing of securitised assets that allowed regulated banks to exceed limitations on their risk-taking was handled by the shadow banking sector.
To this day, shadow banking continues to make a significant contribution to financing the real economy. For example, according to the Financial Stability Board, in 2013 shadow banking assets represented 25% of total financial system assets. While the average annual growth in assets of banks (2011-2014) was 5.6%, shadow banking growth stood at 6.3%.
A comparison of country-based share of shadow banking assets between 2010 and 2014 reveals the largest rise for China from 2% to 8%, while the USA maintains its dominance of the shadow banking markets with around 40%.
The failure of private sector guarantees to help shadow banking endure the global financial crisis can be traced to underestimated tail risks by credit rating agencies, risk managers and investors. Credit rating agencies lack of transparency, when it comes to explaining their methods (often disguised as “commercial-in-confidence”), continue to make it difficult for a third party to check assessments.
An excess supply of inexpensive credit also contributed to risk before the global financial crisis of 2008. This was because investors overestimated the value of private credit and liquidity enhancements.
One of the key challenges for regulators now is to devise rules and standards requiring shadow markets to hold enough liquidity to be sufficiently sensitive to risk. However, where investors and financial intermediaries fail to identify new risks, it is less likely that the regulators – who have fewer resources – will succeed.
Raising capital requirements can limit the capacity of financial intermediaries to expand risky activities, although monitoring overall bank leverage may be better. This is because credit ratings cannot be relied upon in the presence of neglected risks. Similarly, monitoring rising exposure of regulated banks to shadow banking or untested financial innovations can also become part of the regulator’s arsenal.
But there remains a major problem that is unlikely to be resolved by any regulation. Regulation is meant to strike a fine balance between close supervision and allowing space for financial innovation because loss of diversity can create stronger channels of transmission and could expose financial systems to greater systemic risk.
Too little regulation encourages excessive risk taking, while too tight a regulation is bound to strangle the financial sector that provides the lifeline for the economy. Striking such a fine balance is next to impossible in a dynamic, global financial sector.
The Basel Accords, set up to strengthen regulation after the financial crisis, will continue to play a key role in helping manage systemic risk like this. For example regulations can collect data that would be useful in macroprudential regulation, taking action to reduce various risks and remaining alert to unfolding trends on the ground.
Regulators need to heed the trends in shadow banking as part of this, to ensure transparency. However the nature of this sector, the long chains and multiple counterparties with unclear financial obligations, will continue to make the job of the regulator very difficult.
Necmi K Avkiran is associate professor in Banking and Finance, The University of Queensland and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/necmi-k-avkiran-298084" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Shadow banking increases the risk of another global financial crisis

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The former Finance Minister Matthias Cormann wanted to repeal the Future of Financial Advice laws and deregulate financial advice. 
But the Assistant Treasurer Josh Frydenberg is planning to regulate the industry, not deregulate it.
Josh Frydenberg told Business Spectator columnist Alan Kohler: “I want to act. Financial planners should operate under the same standards as accountants and lawyers: we need to boost the professionalism and ethical standards of this industry.”
Kohler noted it follows recommendations from the Joint Parliamentary Committee led by Liberal Senator David Fawcett, but the key had been the exposure of corrupt or unethical practices led by Fairfax journalist Adele Ferguson.
Kohler writes there are two types of financial planners: sales people, mainly working for banks, that are deliberately disguised as advisers and have permanent conflicts of interest, account for 80% of the industry. Then there are the genuine independent advisers trying to help savers and retirees.
Kohler writes the banks are lobbying hard against the Fawcett recommendations, but it seems Frydenberg is not listening to them, unlike his predecessor.
 
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More regulation coming for financial planners: Josh Frydenberg

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GUEST OBSERVATION
While financial planning is on the pathway to <a href="https://www.gowerpublishing.com/pdf/SamplePages/Conceptions-of-Professionalism-CH1.pdf" target="_blank">professionalism</a>, its education standards continue to be the subject of much discussion – and for good reason.
The current standards set by ASIC mandate a comparatively low level certification program that can be completed in just days. This is clearly inconsistent with the notion of a profession and is certainly not congruent with the complex financial market, product, legal, business and behavioural knowledge and skills a modern planner requires.
Recent key national reviews acknowledge this and have all recommended increasing education standards to bachelor degree level. These include the <a href="https://fsi.gov.au" target="_blank">Financial System Inquiry</a>, The <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/Financial_Adviser_Qualifications/Report" target="_blank">Parliamentary Joint Committee on Corporations and Financial Services Inquiry</a> and the Australian Financial Services Licence Industry Working Group.
It is also worth noting that some segments of the industry and some professional associations already have degree level education requirements for membership/employment and ongoing continuing professional development.
So where is ASIC on this and why have the current low standards persisted?
Well, they have tried to raise them. In June 2013 ASIC <a href="https://asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-212-licensing-training-of-financial-product-advisers-updates-to-rg-146/" target="_blank">proposed</a> to enhance its guidelines for training of financial advisers in various ways, but this did not progress.
ASIC’s preference is for the introduction of a national exam which it first <a href="https://asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-153-licensing-assessment-and-professional-development-framework-for-financial-advisers/" target="_blank">raised</a> in April 2011. The issue was <a href="https://asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-212-licensing-training-of-financial-product-advisers-updates-to-rg-146/" target="_blank">raised again</a> last year when ASIC suggested that a national exam “may replace any obligation to do a training course”.
The original model was for the test to take the form of an online three-hour exam both for new advisers and for existing advisers (to be repeated every three years).
More recently, ASIC Chairman Greg Medcraft restated this preference as a fundamental component of <a href="https://www.afr.com/p/opinion/asic_chair_says_set_exams_for_planners_KsJkyswSVengfHmYAmzY6K" target="_blank">his vision</a> for financial advisers where the industry sets the competence levels. This is a departure from ASIC’s earlier proposals, and would see ASIC test competencies by overseeing the exam.
As a result, ASIC is positioning itself to move away from the education/training side of the current regulatory regime, where it has largely failed to deliver an appropriate framework.
This leads to the question of whether requiring advisers to undertake an exam every three years would improve adviser competence and lead to better quality advice.
Simple in theory…
The advantages of a single national exam are drawn from the potential efficiency of it – one instrument that can be completed online, give some indication of adviser competence, and provide a clear pass/fail measure that could be easily benchmarked. It is also a simple measure for consumers to utilise.
But the proposal does also raise a number of concerns.
Financial planning contains a diverse array of knowledge and skill areas (eg economics, investment, tax, legal, retirement, estate, insurance, risk, business, behavioural and client engagement). It is hard to imagine how any reasonable measure of competence could be drawn from one online exam covering all of these.
At the same time, it is difficult to assess “soft” skills in a test or exam, yet they are a key part of effective financial advice.
The licensing regime currently requires planners to be RG146 accredited only in the areas which they provide advice. And exam would therefore need multiple modules or versions to allow for various permutations.
The logistics of implementing the exam for somewhere between 18,000 and 30,000 individuals would be complex and suggests a sophisticated examination regime and significant effort in educational design to ensure the integrity of the instrument and its outcomes.
There are few examples of doing this in related professions (law, accounting, nursing, teaching, medicine) with most professions opting for a continuing professional development model.
The problem with the national exam is therefore simple – who pays?
…Difficult to deliver
To do it well, given the scale and complexity of advice, would come at significant cost. With ASIC’s budget being cut and industry suggesting it is not willing to fund it, it’s unclear how it would be achieved, particularly given concerns about the educational efficacy of it as proposed. So it appears it is unlikely to be implemented as ASIC has suggested.
Rather, the proposal should be seen as part of a broader framework that builds on existing elements such as higher education degrees in financial planning, professional associations and the Professional Standards Councils framework.
Proposals to restrict who can call themselves a financial planner/adviser (including draft legislation) and a compensation scheme add further to the options.
What might seem like an easy fix (just make them all do a test), is likely to be little more use in and of itself as RG146. However, as part of a broader professional framework a national exam may have a role to play. This could be for a more specialised purpose such as verifying currency of knowledge (given the continuous changes to taxation, superannuation and other relevant laws) than what ASIC envisages.
Other elements such as enforceable codes of conduct, complaints systems and compensations schemes would form the broader professional environment and assessment of competency. This would create a level and robust playing field for financial advice and should go some way to building consumer confidence in the sector.
Mark Brimble is discipline head of finance and financial planning at Griffith University.<img src="https://counter.theconversation.edu.au/content/36208/count.gif" alt="The Conversation" width="1" height="1" style="line-height: 1.3em;">
This article was originally published on <a href="https://theconversation.com" style="line-height: 1.3em;">The Conversation</a>.
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po-LsXgBTHBmX

Why we still don’t expect financial planners to sit an exam

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Guest observation
David Murray’s <a href="https://fsi.gov.au">Financial System Inquiry</a> may call for the removal of superannuation tax breaks but the government’s tax discussion paper, due to be released next week, is unlikely to advocate similar changes.
The FSI inquiry report recommends articulating the overarching purpose of the superannuation system so that future tax changes can be measured against the objective.
It says the purpose of superannuation is to “provide income in retirement to substitute or supplement the age pension”. This then prescribes, in theory at least, the tax breaks individuals can get from the system.
In this case, the maximum tax break an individual should get from superannuation would be roughly equal to the net present value of the age pension paid from age 65 to the median life expectancy.
The age pension is designed to keep people out of poverty after they leave the workforce. Yet how does the inquiry’s definition of superannuation fit with financial planning theory which says that people need to aim for <a href="https://www.oecd.org/daf/fin/44628862.pdf">70% of pre-retirement income</a> to maintain their lifestyle?
It makes redundant any discussion about whether the current compulsory contribution limit of 9.25% provides an adequate retirement income. It also implies that superannuation should attract few tax breaks.
The theory is don't use taxes to incentivise saving
However, this raises the question of whether the tax system should be used to encourage saving, either through superannuation or outside it. There are four reasons why the tax system should not be used for this purpose.
First, the tax revenue forgone through the concession is borne by all taxpayers, while only those using the concession benefit from it.
Second and third, tax benefits only go to the wealthy who have disposable income to save and who have access to information to maximise the benefits of saving, such as accountants and lawyers.
Finally, tax concessions don’t increase savings, they just move preferences to where people save.But the reality is that they are used.
The report observes that superannuation tax breaks <a href="https://www.smh.com.au/business/tax-breaks-on-housing-shares-and-super-distort-behaviour-benefit-the-rich-murray-20141207-121x1c">distort behaviour and favour the wealthy</a>. However, a number of its observations will be difficult for the government to implement.
The inquiry report endorses <a href="https://taxreview.treasury.gov.au/content/Content.aspx?doc=html/home.htm">Ken Henry’s tax review</a> recommendation to reduce the tax benefits of popular negative gearing investing as well as the over-taxation of income from deposits. It also advocates that income from large superannuation balances should attract more tax, however this has a whiff of retrospective tax about it.
Another suggestion that post-tax contributions should be further limited is also unlikely to be adopted by the government. Few people use these concessions and they benefit empty nesters who are selling down to enjoy a hipster inner city lifestyle rather than those trying to minimize their tax obligations.
The report says the system that taxes super earnings at 15% in the accumulation phase but not in the retirement phase, leads to asset allocation distortions, tax arbitrage and prevents funds offering “whole-of-life” financial products. However, it is doubtful whether any of these problems are tangible and important enough to warrant changing the system.
Finally, the report suggested removing the company share dividend imputation system and reviewing the capital gains tax discount. Interestingly, the report argues these incentives distort asset allocation yet both these measures were introduced with the intention of removing tax distortions.
Imputation credits were introduced to lower the cost of capital towards equity rather than debt funding. The capital gains tax discount was introduced to prevent the over-taxation that potentially arises from capital gains all being taxed in one year leading to higher marginal tax rates.
However, the report’s focus on changing interest withholding tax on foreign lending institutions should be addressed. This tax distorts the funding decisions of financial institutions and places Australia at an international competitive disadvantage. If it has to be paid then almost invariably it will be paid by the Australian borrower, not the foreign lender, so it just raises the cost of capital with little revenue to be gained.
Government unlikely to implement super tax changes
Should these tax observations be included in the tax issues paper? They seem to warrant considered discussion but with two overarching caveats.
First, superannuation is a very long-term savings vehicle and changes reduces confidence in the system.
Second, savings in the system are there based on the good faith continuance of existing tax laws. In the past 35 years there has been only <a href="https://www.aph.gov.au/binaries/library/pubs/bn/eco/chron_superannuation.pdf">minor changes </a>that adversely affected existing superannuation account balances.
However, the chances of the government implementing these tax changes is slight.
Though <a href="https://www.smh.com.au/business/treasurer-joe-hockey-urges-banks-to-cooperate-with-regulators-20141207-121vxt">Treasurer Joe Hockey backed</a> the report’s recommendations to lower fees for super funds, it is unlikely that many of the report’s observations in terms of tax will go ahead.
<a href="https://www.smh.com.au/business/the-economy/super-system-must-remain-strong-says-tony-abbott-20130926-2ufq0">Adverse changes to the superannuation system</a> are off the table for the first term of this government apparently. If superannuation tax breaks are measured against the age pension, a significant proportion of the population will be adversely affected.
Changes to capital gains tax is also unlikely to go ahead as most countries differentiate between regular income and capital gains. What remains is imputation credits for company dividends. Adverse changes here would be politically unwise as they are very popular among mum and dad investors and super funds.
Gordon Mackenzie is a Senior Lecturer at UNSW Australia Business School.
<img src="https://counter.theconversation.edu.au/content/35158/count.gif" alt="The Conversation" width="1" height="1">This article was originally published on <a href="https://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/murray-pushes-for-fewer-super-tax-breaks-but-change-is-unlikely-35158">original article</a>.
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Murray pushes for fewer super tax breaks but change is unlikely 

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GUEST OBSERVATION
Finally, <a href="https://fsi.gov.au/publications/final-report/executive-summary/" target="_blank">Financial System Inquiry</a> chairman, David Murray, has brought some consistency into two hot debates running in finance.
Parliament, financial media commentators and a whole range of vested interests have argued at length over the last year about who can give financial advice, how they should be remunerated, how they should be trained and what qualifications they should have.
At the same time there has been an <a href="/news">ongoing debate</a> in the media, through speeches and submissions, about who is appropriately qualified to be trustees of large superannuation funds.
The same groups have made the opposite arguments in the two cases.
One group of institutions, mainly the industry super funds, has been arguing that we need to have greater independence of financial planners and advisers. Another group of institutions, mainly the retail super funds, have been arguing that advisers can be aligned but should be more closely controlled. Most importantly, they argue that they should be more professional. The recent political fight around the roll back of Labor’s Future of Financial Advice (FOFA) reforms has essentially been focused on these issues of independence and professionalism.
At the same time the retail super funds have been pushing to ensure that a majority of the directors of superannuation funds should be independent. They are pushing the case for greater professionalism of superannuation trustees. By contrast the industry super funds have been arguing that this is not necessary, and that trustees do not need special knowledge. Most particularly they have argued that trustees coming from particular employers and particular employee groups, without any particular qualification, are appropriate.
Murray has pointed out the inconsistency. If the person advising me on my $200,000 superannuation fund must be professional, then the trustee for a fund managing $2 billion for its members surely deserves the same respect.
Clearly both are important. An adviser who gives me bad advice can ruin my retirement and my life. Notably however, a superannuation fund which makes mistakes can cost thousands of people security in their retirement. There are three reasons to think that the latter is more important.
The 2010 <a href="https://www.supersystemreview.gov.au/content/content.aspx?doc=html/final_report.htm" target="_blank">Cooper report</a> into the superannuation system pointed out that by 2035 the average superannuation fund supervised by the Australian Prudential Regulation Authority (APRA) (that is, excluding the self-managed sector) will be managing $53 billion on behalf of superannuants. This is a very large amount of money, the lifetime savings of thousands of members. Putting to one side the politics and the vested interests, clearly it is extremely important that the directors of superannuation funds be appropriately qualified and highly skilled.
The second reason is that superannuation sector is not simply important to individuals, but to Australia’s economic future. Murray makes clear that the superannuation sector is well on the way to being one of the largest components of the Australian financial system, not far from the size of the banks. Where and how it invests will shape much of Australia’s growth and development. This alone is a key reason to demand a high degree of professionalism in the management of the sector.
The third argument Murray makes for independence of directors, is that since people can choose which fund they join, the superannuation funds will be increasingly de-linked from particular industries. If anyone can join a fund, there is little reason for the trustees of the fund to belong to a particular sector of the workforce (employers or employees).
One would actually hope that APRA would have a say in approving who could be a trustee of a major superannuation fund, and would set very high standards of training and experience.
There are lots of vested interests involved in these debates. Murray has however given us reasons to sit back and ask, what is the best structure for the future? This is important to Australia’s future.
So let’s have some honesty and consistency in the public debate. If professionalism is important at the level of the individual then we should expect high standards of professionalism from the trustees of superannuation funds. Arguably, trustees of major funds should be held to a higher standard.
Rodney Maddock is Vice Chancellor's fellow at Victoria University and adjunct professor of Economics at Monash University.
This article was originally published on <a href="https://theconversation.com" style="line-height: 1.3em;">The Conversation</a>.
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rmaddock-AxiRakmDz9

Murray pinpoints inconsistency on financial advice and super trustees

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The Australian Bureau of Statistics (ABS) published housing finance data for October yesterday. 
The data release coincided with the Australian Prudential Regulation Authority (APRA) sending Australian Authorised Deposit-taking Authorities (ADIs) a letter on Tuesday afternoon.  The letter highlighted that APRA was going to increase surveillance on risky lending and have a specific focus in growth in investor lending by ADIs. 
The October housing finance data showed that the proportion of lending to investors had grown to fresh record highs while owner occupier lending is slowing.
The value of housing finance commitments continues to become much more important than the headline number of commitments.  The reason being that the number of commitments only coves owner occupier commitments, excluding investors completely which are the key driver of the current market. 
Furthermore, with APRA now focused on ADIs not growing housing credit to investors too fast, a focus on the value of lending becomes even more important.
<img class="aligncenter size-full wp-image-4104" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-12.jpg" alt="Chart 1" width="500" height="180">
The above chart uses raw (not seasonally adjusted) data and uses a 12 month average to smooth the volatility of the data.  The chart shows an ongoing decline in demand from owner occupier first home buyers and more recently a dip in commitments by owner occupiers that already own a home. 
Across the four borrower types listed you can see that investors now account for the greatest proportion of borrowings from ADIs.  With values continuing to rise across capital city markets clearly they are a key driver of this growth.
<img class="aligncenter size-full wp-image-4105" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-22.jpg" alt="Chart 2" width="500" height="181">
The second chart shows the monthly value of housing finance commitments across owner occupier new loans (excluding refinances) owner occupier refinances and investment loans. 
Over the month, owner occupier refinance commitments increased by 3.7%, owner occupier new loan commitments fell by -0.1%, while investment commitments rose by 1.0%. 
Year on year, the increases have been recorded at 18.1% for owner occupier refinances, 0.8% for owner occupier new loans and 19.8% for investment loans.  With $5.4 billion in commitments for owner occupier refinance commitments in October, activity in this space continues to trend higher. Investment lending is also trending higher reaching a record high $12.1 billion in October. 
Meanwhile, owner occupier new loan commitments have actually pulled back a little of late.  After monthly commitments sat at a record high $12.0 billion in November 2013, they have pulled back to $11.7 billion in October 2014.
For only the second month on record, the value of investment loans was greater than the value of owner occupier new loans in October 2014.
<img class="aligncenter size-full wp-image-4106" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-32.jpg" alt="Chart 3" width="500" height="180">
As a proportion of the value of all housing finance commitments, investors were steady at a record-high 41.4% in October.  Owner occupier new loans accounted for 40.2% (a new all-time low) and owner occupier refinances accounted for 18.5% of lending, its greatest proportion since August 2012. 
If we just look at new lending, excluding refinances, investment lending reached a new all-time high of 50.8% of total lending in October, more than one in every two loans.  The capital city housing market has been rising since hitting a low point in May 2012 and at that time investor housing finance commitments totalled $6.9 billion and 33.9% of all housing finance commitments. 
Clearly there has been a substantial surge in demand from this segment, recorded at $12.1 billion in October 2014 and 41.4% of all borrowings.
<img class="aligncenter size-full wp-image-4107" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-42.jpg" alt="Chart 4" width="500" height="181">
The headline result that gets reported on each month is the number of owner occupier loans.  Although it is a very valuable statistic, it should be read with caution because it is missing a significant proportion of the market, those represented by investors. 
As the above chart shows, much like the data on the value of commitments, the number of owner occupier new loan commitments is now trending lower while refinance commitments trend higher at a  moderate pace.  In October, the number of refinance commitments rose 3.6% while new loan commitments fell by -1.4%. 
Year on year, refinances are 7.5% higher while new loan commitments are -4.2% lower.  The number of new loan commitments most recently peaked at 35,568 in November 2013 and has since fallen by -5.5% to 33,597 commitments in October 2014.  There were 18,123 refinance commitments in October 2014, the highest monthly volume since February 2008.
<img class="aligncenter size-full wp-image-4108" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-51.jpg" alt="Chart 5" width="500" height="181">
As investor activity has risen, there has been a sharp drop-off in the number of loans to first home buyers.  Although there is no data to support it, there are plenty of anecdotal suggestions that many first home buyers are choosing to purchase investment properties rather than homes for owner occupation.  Unfortunately, the ABS data only captures those homes purchased by first home buyers for owner occupation. 
Owner occupier first home buyer numbers continue to languish at near record low levels.  The proportion of total owner occupier housing finance commitment to first home buyers hit a record low 11.6% in October 2014.  The number of loans actually rose, up 1.2% over the month however, year-on-year first home buyer commitments are -7.8% lower.
The Reserve Bank (RBA) has already highlighted a number of times that they have some concerns with the heightened level of investment activity, particularly in Sydney and Melbourne.  With the proportion of loans to investors hitting a new record high in September it will further re-iterate those concerns. 
This week, APRA wrote to ADIs highlighting some concerns about lending practices and providing a set of guidelines to ensure prudential standards are maintained.  With investor activity continuing to rise in October, it seems the concerns are well found. 
We may see a further increase in the November data next month however, it is likely that growth in the value of investment finance commitments should start to ease thereafter.
<img class="aligncenter size-full wp-image-4109" src="https://blog.corelogic.com.au/wp-content/uploads/2014/12/Chart-61.jpg" alt="Chart 6" width="500" height="182">
Of course, owner occupier lending demand is already slowing and if/when investment lending follows suit, demand for mortgages should ease and we would expect that it will also continue to contribute to a further slowing of home value growth. It will be interesting to see how the slowing of demand plays out from a new housing perspective. 
With the RBA hopeful that a heightened level of housing construction can help assist the economy as it transitions away from resource investment, as value growth slows some of these projects may be in jeopardy. 
Given most developers are private businesses, they generally need growing demand for housing and some increase in home values to allow enough pre-sales for the project to go ahead. 
We are already seeing sales volumes and home values trending lower, so if demand for mortgages softens further we will potentially see a fall in dwelling commencements despite the fact that there is such a strong pipeline of development in place. 
It will be interesting to see how this plays out in 2015.
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ckusher-ujnxiKuFQs

No wonder APRA are concerned: Investment lending continues to surge in October

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GUEST OBSERVATION
A key component of the <a href="https://fsi.gov.au/publications/final-report/">Financial System Inquiry</a> handed to Treasurer Joe Hockey this week was that “the financial system should be subject and responsive to market forces, including competition”. But on both market forces and competition, inquiry chair David Murray and his team squibbed it.
Much of the discussion of the Murray report in the financial press has been on the push back by the major banks against the inquiry’s insistence they hold more capital and properly account for the risks in mortgage lending. But the issue of the optimal structure of the Australian financial system, as opposed to its internal workings, was completely ignored.
Despite talk in Australia of coming “structural reforms”, Murray has set his face in stone against such reforms in the banking sector. And he’s not alone - the report points out that neither APRA nor the RBA nor the banking industry saw a strong case for such reforms.
“The Inquiry does not recommend pursuing industry-wide structural reforms such as ring-fencing. These measures can have high costs, and require changes for all institutions regardless of the institution-specific risks."
The inquiry did not consider the considerable risk-reduction benefits of reforms such as ring fencing as against the putative costs. Murray points out that although Australia did dodge the global financial crisis, it is not immune to “financial shock” and as a result the banking system must be made more resilient, hence the call for more capital. These were precisely the same arguments made for major structural reforms, such as <a href="https://faculty.london.edu/fmalherbe/overview.pdf">ring fencing</a> in the UK, and the “Volker rule” in the USA, but such arguments were dismissed in the Australian context.
Ring fencing, <a href="https://hmt-sanctions.s3.amazonaws.com/ICB%20final%20report/ICB%2520Final%2520Report%5B1%5D.pdf">recommended</a> by the UK Independent Commission on Banking in 2011, is often portrayed as cutting loose the investment banking cowboys but, in fact, it is a very sensible crisis management tool for bankers and regulators. As outlined by the Commission, and in the process of being <a href="https://www.gov.uk/government/policies/creating-stronger-and-safer-banks">implemented</a> by the UK government, certain banking functions, such as payments and deposit taking, would be designated as being “permitted” inside the ring fence, and everything else would be outside. It is like having a “safe” bank within a bank.
Four pillars distortions
The elephant in the room in Australian banking is the “four pillars” policy, which is the unwritten rule that the pillars (originally six but now the four major banks) cannot acquire one another. The policy is not without its critics. In response to the Wallis Inquiry, which recommended scrapping the policy for competition reasons, Peter Costello maintained the prohibition on local takeovers, but left the door open (very slightly) to international acquisitions.
The four pillars responded to this near-death experience by increasing their importance and, in the almost 15 years since Wallis, have acquired smaller banks, such as Westpac’s take-over of St. George. They also branched out to acquire retail super funds. In 2013, the superannuation subsidiaries acquired by the four pillars, such as BT and First State, were four of the top five retail funds by assets (one of the original pillars, AMP was first). But getting bigger does not mean getting better, as evidenced by the financial planning scandals facing some of the major banks.
The Murray inquiry took a diametrically opposed position to Wallis on the four pillars, with a somewhat bizarre argument for a free-market advocate: “To prevent further concentration, the longstanding ‘Four Pillars’ policy, which precludes mergers between the four major banks, should be preserved as outlined in the Interim Report.”
While the four pillars policy has been credited with helping Australia survive the global financial crisis, its impact is somewhat overrated as it relies on the argument that four CEOs cannot be as stupid as one or two - a fact that has been proven wrong elsewhere.
There are a number of questions that the FSI team failed to ask - “Why four pillars, why not two, three or six?” and “Why not international banks as part of the four/three or two?”
Too many branches
Australia is chronically over-banked. The latest <a href="https://www.apra.gov.au/adi/Publications/Documents/2014_PoP_PDF.pdf?WT.mc_id=1408POP-PDF">APRA statistics</a> show there are 69 firms with licenses as Authorised Deposit-taking Institutions (ADIs) with full service branches or other “face to face” customer contact operations. Between them, these ADIs operate 6,332 branches, which means there is a full service branch for every 3,650 people in Australia. It’s one service outlet for every 1,918 individuals if you count Australia Post (Bank@Post) stores. And there is one ATM for every 1,500 people, one Eftpos terminal for every 30 people.
With such overbanking and associated costs, how do Australian banks make such super profits? It can hardly be lack of competition as Murray believes, as there is competition a plenty. Fees of course are one answer, such as the <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-03-18/credit-card-surcharges-top-800-million/5327092">credit card surcharges</a> that have recently come under scrutiny, not least by the Murray report which recommends banning unnecessary surcharges.
But bank bashing is national sport and it is much harder to answer the question: “What should a modern banking system look like in Australia?” First of all – it should be modern!
This article continues on the next page. Please click below.
<hr class="system-pagebreak">
What a modern banking system looks like
The Murray inquiry makes great play of financial innovation, introducing concepts such as “crowdfunding” and “peer-to-peer lending”. These fashionable but largely irrelevant notions are little more than DIY advertising for someone to lend you money, a sort of banking dating site.
Surprisingly, the Murray report does not address one of the major disruptors in the Australian financial system – internet/mobile banking.
With 72% of online Australians and 35% of mobile phone customers using online/mobile banking, why are so many physical branches and banks needed - surely they will go the way of the corner shop? In future the competitors to the banks for payments, credit cards and insurance will not be other banks, but instead companies such as <a href="https://www.woolworthsmoney.com.au/wowm/wps/wcm/connect/WowMoney/WowMoney/Credit+Cards/">Woolworths</a> and <a href="https://www.abc.net.au/7.30/content/2014/s4062642.htm">Coles</a>.
In the US, JPMorgan Chase, one of the world’s largest banks, operates around 5,700 branches for some 70 million customer accounts. So technically, only one bank is needed to handle banking for Australia’s population of 23.1 million. Australian banks bring little innovation to banking, as they source the bulk of their technology from foreign suppliers and proven technology from one major bank could reduce costs considerably across the system.
The question of ownership and control is of course important. Having one bank, albeit as illustrious as JPMorgan, could be dangerous. But maybe two would be sufficient? One local to provide backup in the case that the other international bank failed?
What are the arguments for four pillars? None, other than status-quo.
The issue is not ownership nor the number of banks, it is regulation. If one of the banks was undoubtedly stronger than local banks could be, it would actually diversify the sector, which should reduce its riskiness overall.
But the Murray Inquiry did not consider how technology will radically change ordinary banking in the next decade, wasting the chance of making the structural reforms needed to adapt to such changes.
Pat McConnell is honorary fellow, Macquarie University Applied Finance Centre at Macquarie University.
<img src="https://counter.theconversation.edu.au/content/35244/count.gif" alt="The Conversation" width="1" height="1">This article was originally published on <a href="https://theconversation.com" target="_blank" style="line-height: 1.3em;">The Conversation</a>.
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Murray inquiry not made for a future with fewer banks

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GUEST OBSERVATION
Last week brought the latest instalment in the continuing Australian financial planning industry saga. Senators Jacqui Lambie and Ricky Muir blocked the Abbott government’s <a href="https://www.comlaw.gov.au/Details/F2014L00891/Explanatory%20Statement/Text" target="_blank">rollback</a> of some of Labor’s Future of Financial Advice (FoFA) reforms.
The proposed changes to FoFA watered down some of its more controversial aspects. They included the provisions establishing a “best interests” duty for financial planners and restrictions on conflicted remuneration. Other rollbacks included changes that required fee disclosure statements and the obligation for clients paying ongoing fees to “opt in” by written consent every two years.
The Abbott government maintained the reforms were merely to streamline regulation, prompted by the need to reduce bureaucracy and red tape. However, the recent and continuing <a href="https://www.smh.com.au/business/timbercorp-victims-set-to-sue-financial-planners-while-liquidator-presses-for-loans-to-be-repaid-20140810-102gco" target="_blank">financial planning scandals</a> made such streamlining politically unsustainable.
So we are back to Labor’s original FoFA legislation. But where does this leave the financial planning industry and the thousands of Australians in need of financial advice?
There are claims within the financial planning industry the blocking of the regulation will cause further <a href="https://www.theage.com.au/business/banking-and-finance/fofa-reforms-senate-shock-spurs-financial-adviser-scramble-20141119-11q2te">instability</a>. This is as firms scramble to meet the FoFA requirements, particularly those relating to fee disclosure and opt in obligations.
Yet FoFA has been law since 1 July 2013, so it is difficult at first glance to understand why the blocked rollback would significantly impact the industry.
It seems that large sections of the industry have been operating on the basis the coalition’s FoFA rollback changes would become law.
It is a view reflected by the Australian Securities and Investments Commission. It <a href="https://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2013-releases/13-355mr-asic-update-on-fofa/" target="_blank">said</a> in December 2013 it would take a “facilitative” approach to FoFA enforcement in light of the proposed changes and would “not take enforcement action in relation to the specific FoFA provisions that the government is planning to repeal”.
After the reforms were disallowed in the Senate, ASIC said this week it would take a “<a href="https://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-307mr-disallowance-of-fofa-regulations/" target="_blank">practical and measured approach</a>” to administering FoFA as it now stands. The regulator says it recognises that compliance with FoFA will require systems changes for many Australian financial services licensees. This facilitative approach to FoFA compliance will continue until 1 July 2015.
It seems unlikely there is any need for panic within the industry as there is still some time before ASIC will enforce FOFA compliance. Nonetheless, those licensees who deferred making costly system changes in line with Labor’s legislation may now find themselves having to make those changes rapidly in a highly uncertain regulatory environment.
In the long run, this situation is likely to lead to less affordable financial advice for Australian consumers.
Despite the reform rollback not going ahead, there still isn’t an easy solution for the financial advice industry. The unchanged legislation now retains greater consumer protection. But it does <a href="https://www.theage.com.au/business/comment-and-analysis/fofa-doesnt-clean-up-the-financial-advice-minefield-20141121-11riwk" target="_blank">little to address </a>what many regard as the fundamental cause of the poor reputation of the Australian financial planning industry – the need to raise the professional, ethical and educational standards of financial advisers.
While consumers will get some greater level of protection through increased fee disclosure, this comes at a price. This protection also relies on consumers taking the time to read and understand the disclosures made by their financial planners. Financial planners can continue to give poor quality advice. What will change is increased upfront fees and greater disclosure around these fees resulting in higher costs. There will be less scope for scaled advice which was part of the Abbott government reforms.
FoFA still fails to set educational or professional standards for financial planners. Until industry entry standards are lifted, FoFA will not deliver accessible financial advice for the Australians who need it.
Absent an urgent rethink by the Abbott government on FoFA, after last week’s events it seems the goal of access to affordable and trustworthy financial advice for Australian consumers is more elusive than ever.
<img src="https://counter.theconversation.edu.au/content/34486/count.gif" alt="The Conversation" width="1" height="1">Julie Walker is associate professor in accounting at The University of Queensland.
<a href="https://theconversation.com/institutions/university-of-queensland"></a>
Julie Walker has previously received research funding from the Institute of Chartered Accountants in Australia. She is affiliated with Chartered Accountants Australia New Zealand.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>.
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FoFA fiasco: No quick fix for the advice industry

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The financial planning industry has been thrown into turmoil and the Abbott government has been dealt another blow, after a group of rebel senators last night banded together to disallow the government’s changes to the Freedom of Financial Advice regime.
The group, which calls itself the ‘Coalition of Common Sense’, was led by Labor senator Sam Dastyari and independent senator Nick Xenophon, and included defecting Palmer United Palmer senator Jacqui Lambie and Motoring Enthusiasts Party senator Ricky Muir.
They joined together to disallow the Abbott government’s proposed changes to the previous Labor government's FoFA laws, which had been <a href="https://www.smartcompany.com.au/finance/42838-palmer-deal-means-watered-down-future-of-financial-advice-reforms-will-proceed" target="_blank">watered down by a deal struck with Clive Palmer in July</a>.
The effect will be a return to Labor’s 2012 laws.
Lambie and Muir revealed they were not comfortable with the deal cut by Palmer, believing it diluted reforms needed to the industry. Lambie and Muir both said they were further convinced after hearing from victims of the Timbercorp financial scandal.
In a speech, Lambie said she regretted obliging to the July deal. “Sometimes when you make a wrong, you have to go back in there and make it right. And that's exactly what I'm doing now,” she said.
The ‘Coalition of Common Sense’ has not ruled out banding together to vote on other issues, indicating the Abbott government may face further difficulties when dealings with the senate.
<a href="https://www.smartcompany.com.au/legal/politics/41230-government-puts-future-of-financial-advice-reforms-on-ice" target="_blank">The FoFA reforms</a> were introduced by the former Labor government and were designed to protect consumers from financial planning fraud.
The laws originally set out to ban advisers from commissioning for financial advice, requiring them to ask clients whether they wish to continue receiving their service every two years and to act in the best interests of their clients.
In July, the Abbott government moved to water down what it termed the “burdensome” reforms and announced many of the changes would be made by regulation not legislation. But regulation can be cancelled by a disallowance motion through parliament.
The disallowance has left the financial planning industry uncertain about the future of laws governing financial advice.
To revert back to Labor’s laws, financial planners will face a number of strict new laws when dealing with clients. These include:
<ul>
<li>Customers will have to ‘opt in’ to receiving ongoing advice, with financial advisers having to obtain written consent every two years;</li>
<li>Stronger laws around the disclosure of fees;</li>
<li>Advisers will have to act under a broad ‘best interest duty’ towards their clients, considering all aspects of their best interest; and</li>
<li>An end to ‘grandfathering’, which allowed advisers to continue to receive commissions from existing clients.</li>
</ul>
John Brogden, chief executive of the Financial Services Council, said in a statement the consequences will be far-reaching.
“Overturning the FoFA regulations at the eleventh hour will do more harm than good,” Brogden said.
“The industry has been working under the current FoFA arrangements since 1 July. To turn around and just throw them out is irresponsible.”
Paul Stark, head of financial services operations at Crowe Horwath,said Crowe Horwath has been supportive of FoFA reforms to improve the industry but the continued uncertainty through the parliamentary process was frustrating.
“It makes it hard to plan with uncertainty,” says Stark. “It also takes resources and time.”
Stark says most of the impact will be at an operational level. He gave the example of Crowe Horwath’s fee disclosure statements, which he said were built when the Labour government’s reforms came into place and then subsequently changed in July.
“We built a process, and then we had to redefine it, now we have to go back and revisit and reintegrate those process we’d set up 12 months ago,” he says.
Stark says in his experience, most clients do not value fee disclosure documents or opt-in measures.
“Does it really impact the clients? It hasn’t, in any material way, in my experience,” he says.
Stark says he wants more certainty and for the issue to be brought to a final close.
“We would like for it to be brought to a conclusion and get on with what we need to do to continue to improve the industry,” he says.
This article first appeared on SmartCompany.
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Senate scraps FoFA changes as financial planners plead for certainty

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GUEST OBSERVATION
The government has grabbed an unlikely victory to preserve its changes to Labor’s Future of Financial Advice legislation, after a last minute deal with Clive Palmer.
Just over a week after Palmer insisted his party would not be swayed by government lobbying and “<a href="https://www.smh.com.au/comment/fofa-your-financial-planner-is-about-to-send-you-a-letter-but-its-not-enough-20140714-zt6gi" target="_blank">they can stick it up their arse</a>”, PUP senators and their ally, Motoring Enthusiast Ricky Muir voted against disallowance of the regulations.
Finance Minister Mathias Cormann, desperate to preserve his changes – which are widely condemned by consumer and seniors' groups as watering down FoFA – secured PUP by agreeing to make further regulations spelling out protections.
For Cormann, regarded as one of the most ideological in the government, it was a significant personal victory.
Palmer’s U-turn will give the government greater hope for cutting deals with PUP on other issues. Hours before the Senate vote, Deputy Prime Minister Warren Truss told the Coalition parties the government was still “learning to deal with the crossbenchers” to achieve its agenda.
The government now knows that even the most unequivocal statements by Palmer are not necessarily immutable – that, whatever he’s said, he may be willing to play. This presumably increases the incentive for it to humour him when it can – provided he doesn’t set the price too high. It will be a game of wits.
On FoFA, Palmer has ended up centre stage, rather than just being part of a political consortium (with Labor and Greens) saying no. He was able to claim ownership of the outcome. “I was negotiating as hard as I could for the people of Australia,” he told reporters.
He negotiated into the early hours of Tuesday. The terms of the deal were read into the Hansard by Cormann (presumably Palmer thought one couldn’t be too careful).
Publicly, the issue was surrounded by confusion. At one stage on Tuesday morning Labor seemed confident it had the PUPs in its camp.
The government will be delighted to have got its way, but it risks alienating older voters, an important Liberal constituency. Its actions continue to carry significant dangers for the Coalition; Labor can campaign on bringing back stronger consumer protections.
Chief executive of National Seniors Australia Michael O'Neill, who previously had exchanges of text messages in which Palmer indicated he was on side with their concerns, accused the PUP leader of stringing him along.
“Changes as important as this should not have been developed in a deal that excluded all the key interests,” O'Neill said.
Palmer indicated it wasn’t just the consumer groups who’d not been consulted – he said he hadn’t spoken with the financial advice industry either in developing his proposals. “I thought it out. I drew on my own experience,” he said, but then quickly mentioned the “team” of senators.
In his letter to Palmer, Cormann pledged the government would make further regulations within 90 days to ensure certain requirements “are explicitly listed in the Statement of Advice provided by financial advisers to their client and signed off by both”. (In fact they’re already in law or in practice covered by professional standards.)
The requirements are that the adviser has to act in the best interests of the client and prioritise the client’s interests ahead of their own; fees are to be disclosed and the adviser will provide an annual fee disclosure statement for post 1 July 2013 arrangements; a client can return financial products under a 14-day cooling off period; and the client has the right to change instructions to the adviser, if for example they experience a change in their circumstances.
The government also agreed to work in consultation with stakeholders to “establish an enhanced public register of financial advisers”, including advisers who were employees. It would have on it their credentials and status in the industry. The initiative for this, a proposal supported by various inquiries and submissions, came from Motoring Enthusiast Ricky Muir.
The vote was lost 31-34, with the minority comprising Labor, the Greens and independent Nick Xenophon. The DLP’s John Madigan abstained.
Critics condemn the Palmer deal as adding red tape without significantly increasing protections.
Cormann won over Palmer on the day when the interim report of the inquiry into Australia’s financial system, chaired by the former CEO of the Commonwealth Bank David Murray, said it “considers the principle of consumers being able to access advice that helps them meet their financial needs is undermined by the existence of conflicted remuneration structures in financial advice”.
While the government insists it has retained the ban on commissions and conflicted advice its changes allow incentive payments for general advice in certain situations.
The government’s regulations have survived despite the background of the Commonwealth Bank of Australia scandal in which many people lost their savings due to bad or fraudulent advice. In the Coalition parties room on Tuesday National party minister Luke Hartsuyker revealed that his parents had been victims of the CBA affair and said there should be a new Senate inquiry. Treasurer Joe Hockey, whose mother-in-law also lost money (although was later compensated) lashed out at the regulator, the Australian Securities and Investments Commission, saying it is “failed miserably and I am very, very unhappy with this”.
In the Senate, Labor’s Sam Dastyari used the line that’s becoming the opposition’s mantra: the PUP was “wagging the tail wagging the dog”. To the Palmerites, he said: “You have been sold a pup”.
There’s another way of looking at it. At the end of the day, Palmer wanted PUP to have the last bark.
Michelle Grattan is one of Australia's most respected and awarded political journalists. Michelle currently has a dual role with an academic position at the University of Canberra and as associate editor (politics) and chief political correspondent at The Conversation.
This article was originally published on <a href="https://theconversation.com/" target="_blank">The Conversation</a>. 
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