In an unprecedented occurrence for the industry, the government inaugurated three separate inquiries this year into financial products and services, taxation and superannuation, commonly known as the Ripoll, Henry and Cooper reviews respectively.
The changes that could eventuate from these reviews are set to have a profound effect on the financial services industry as a whole and may well be the next revolution to occur in the sector since the introduction of the Financial Services Reform Act in 2004.
Much is riding on the findings and recommendations from the Parliamentary Joint Committee (PJC) on Corporations and Financial Services Inquiry into Financial Products and Services in Australia.
PJC chair Bernie Ripoll has outlined the priorities for the inquiry include the role of the adviser, role of commissions, marketing and advertising campaigns, licensing, consumer financial literacy, adviser education, professional indemnity (PI) insurance, the role of banks and the role of the regulator.
Ripoll has indicated that change is likely for the Australian financial services licensing regime as there is almost an anomaly that exists within the sector at present.
"I think that's an area that we've got to pay a lot of attention to, in terms of trying to providing a clearer, more defined sector," he says.
There are arguably several areas that could be reviewed around licensing, such as minimum requirements for obtaining an Australian financial services licence, the ongoing training and accreditation standards for licence retention and the role of the responsible officer and directors.
While some reform is necessary, industry stakeholders are hoping the changes strengthen the system and support licensees and advisers to deliver great advice outcomes, rather than adding layers of complex regulation and restrictions.
In regards to commissions, the PJC is determined to establish a sound model that can be used for the industry.
"It's not a simple area, but an area that we are determined to find some clarity and find a reasonable sound model that will provide well into the future for the financial services sector but also provide some consumer protection that we all expect," Ripoll says.
The PJC also has concerns over the industry's understanding of PI, with the review receiving evidence of misuse.
"Certainly a lot of evidence that we've received is that some people purport that they are covered or their clients are covered by insurance because they have PI. That is simply not the case," Ripoll says.
Some industry organisations in their submissions have called for full tax deductibility of all financial advice, a necessary step for securing greater trust between financial advisers and their clients.
The fact commission-based financial advice attracts a tax deduction, while advice given by fee-for-service advisers currently does not, is a distortion currently facing the industry that many hope will be addressed when the PJC's terms of reference are tabled in Parliament on 23 November.
The Henry review - the government's broader taxation review led by Treasury secretary Ken Henry - is also currently finalising its recommendations and is on track to deliver its report by the end of this year.
The review panel has been examining Australian and state government taxes and interactions with the transfer system to make recommendations that will position Australia to deal with the demographic, social, economic and environmental challenges that lie ahead.
The review panel received more than 1000 submissions, which have canvassed a wide range of issues of concern.
The appropriateness of the remaining superannuation taxes and, importantly, the adequacy of superannuation in the context of the superannuation guarantee have also come under revision.
While various industry organisations have pushed for superannuation contributions to be increased to 12-15 per cent, some are concerned about the tax review panel's recommendation to leave the superannuation guarantee at 9 per cent. Some organisations are concerned the modelling and projections used in the report may underestimate what is truly adequate to finance one's retirement.
The decision by the panel to increase the superannuation preservation age to 67 has also been a source of significant anxiety for some industry stakeholders.
As a result, some are encouraging the panel to carefully consider whether the potential fiscal benefits from an increased preservation age that extends to voluntary superannuation contributions outweigh the disincentive to save through superannuation.
The Henry review has also presented the opportunity for the government to address some regulatory and modernisation issues to ensure post-retirement products meet retirees' needs.
Industry bodies have argued in their submissions that the current capital regulatory requirements for life companies and the definition of life insurance products have hampered the annuity market.
Meanwhile, the Cooper review is in full swing, with many expecting this inquiry to carry the broadest scope and the greatest potential to shape the direction of the Australian superannuation system for
future generations.
Phase one of the examination, which covers governance, garnered more than 100 submissions from the industry.
Some stakeholders in their submissions have argued that the current governance model has been effective, considering no Australian Prudential Regulation Authority-regulated superannuation fund has failed during the most severe financial crisis in 80 years.
Various industry organisations have called on the Cooper review not to tamper with the trustee model, while others are pushing for an increase in the overall level of trustee knowledge.
Major areas for improvement have been identified in the submissions, with recommendations citing consideration to instituting minimum competence standards for trustees and a policy on trustee composition, selection, removal, tenure and succession planning.
Mandatory training for all new trustee directors as part of their induction and a requirement for trustee directors to renominate every three years has also been raised in the submissions.
Changes to superannuation funds' prudential requirements have also come under the spotlight, with some groups arguing the current capital and liquidity requirements of funds are inadequate.
While preliminary recommendations from phase one are expected to be released early next month, the review panel has recently called for submissions in response to the release of phase two of the examination, which covers operation and efficiency.
The review's chair, Jeremy Cooper, has said the phase two issues paper raises some hard, practical questions for the superannuation industry.
"Do super funds have the right tools to measure their overall efficiency? The average Australian worker has three super accounts when they only need one - how is the industry going to fix this? Do we need fewer, but much bigger, super funds?" Cooper says.
The closing date for submissions is 14 December, with the panel estimating preliminary recommendations to be released around March-April next year.
The third phase of the review will focus on structure, with the issues paper being released on 14 December and preliminary recommendations to be reported around April-May next year.
The Cooper review expects to deliver the final report to the Government on 30 June 2010.
