by Susan Edmunds
Australia’s Government will consult with the industry and public before responding to the inquiry. Consultation will happen in March.
The report identified three main characteristics needed for an effective financial system: Efficiency, resilience and fair treatment. Those characteristics are already central to the New Zealand Financial Markets Conduct Act, the new unfair contract terms regime and the new responsible lending code.
Ross Pennington, a partner at Chapman Tripp in Auckland, said the FSI would not have a direct impact on New Zealand’s markets or the FMA approach although it could give the regulator some “ideas”.
He said the FSI and the submissions made to it could establish the vibe for the industry especially in relation to superannuation.
The report made a number of recommendations for improving the operational efficiency of Australia’s superannuation system, highlighting a lack of price-based competition and the fact that superannuation assets were not being efficiently converted into retirement incomes.
The recommendations which will likely be of particular interest in the KiwiSaver context included automatically allocating new workforce entrants to default funds in products chosen by the government after a competitive tender process, requiring trustees to pre-select for each member’s retirement a “comprehensive income product” and to communicate this selection to the member, with drawdowns then commencing on the member’s instruction and requiring superannuation funds to provide retirement income projections on member statements from defined contribution schemes.
While the FSI recommends increasing restrictions on the Australian financial adviser market, Pennington said things could be about to get easier for advisers on this side of the Tasman.
The looming Financial Advisers Act review could lighten the regulatory burden and clarify adviser obligations around research and personalised advice, making the rules more focused and effective, he said.
He said his firm had been encouraging MBIE to look at ways the FAA review could lighten the regulatory burden. “The FMCA is attempting to lighten the load in some area of capital raising ant the FAA technology hasn’t kept up.”
Some of the FAA red tape was strangling industry players, he said. “To the extent the FAA has been a bit of a beat down on the sector it would be good if it could be simplified and offer more encouragement and support.”
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