Fast Lane: A piece of red tape that shouldn’t be cut

It’s hard to argue against cutting red tape.

Red tape slows business down, it’s costly and it stifles innovation.

That’s why a major part of the Coalition government’s election platform was a promise to cut red tape.

The government sharpened its scissors quickly with the announcement it will seek to abolish more than 8000 redundant federal laws with its first “repeal day”, scheduled for March.

But the red tape cutting has actually already begun and just before Christmas, assistant treasurer Arthur Sinodinos announced that ”consistent with the Coalition’s election commitment to reduce compliance costs for small business, financial advisors and consumers” new legislation governing financial planners would be ”improved”.

This legislation was enacted after a Senate inquiry into the collapse of several high-fee institutions and required financial planners to inform their clients about annual fees and trailing commissions. 

Under the new legislation, each financial planner would be required to send each client an annual statement which included information on the fee the planner had taken out of their fund in the previous year and the services that had been provided in return for the fee.

Every second year, financial planners would be required to also send a renewal notice

Financial planners would be required to act in the ”best interests” of their clients and to ”place the interests of their clients ahead of their own”.

And from July 2013 it would be illegal for any new deal between a planner and a client to be funded by ”conflicted remuneration” or kickbacks.

But the financial planners have cried “red tape” and in response the Coalition government jumped to abolish the requirement to send all clients an annual statement, this will only apply to new clients, signed up from July 2013.

Just before Christmas while the rest of Australia was busy on holidays the government also scrapped the requirement for anyone paying an ongoing fee to ”opt in” every two years.

Unless a client contacts their financial planner, it will be assumed they want to keep paying the annual fee. 

I’m all for cutting burdensome red tape, but it seems this little piece of red tape actually served to protect and inform the customers of financial planners.