We are currently seeing push back from the large financial institutions over the future of financial advice (FoFA) and the new capital requirements for banks. This is expected as the four pillar banks have such a large market share of investment moneys and ownership of financial planning businesses which they do not wish to lose.
In 1997 the private lending industry was regulated by the Managed Investments Act. It imposed duties such as acting in the best interests of Investors and imposed capital requirements on operators. Cutting “red tape” is not, in my view, removing duties which any responsible business should be doing in any event. Having sufficient capital and lending practices so that businesses can survive economic down turn events such as GFC, without having to rely on government guarantees, is good business. If a business is involved in looking after other people’s hard earned moneys, this should be a requirement.
It has been a long road for GPS since 1997 with many further rounds of regulation. What we have seen in the past is an industry with a large number of operators and very poor performance records. What remains today is a changed industry in which the competent survived and can now demand respect.
Regrettably, the private lending industry is not well regarded by financial planners. This is most likely because GPS does not pay commissions or other fees for referral of Investors.
While I am generally opposed to over regulation by government, in this instance I have seen from approximately 17 years experience, that it is required. If the regulation is enacted then perhaps, in 20 years time, financial planners may have a better reputation amongst the GPS Investor base.