Lessons, not rules, from Aussie experience

Australia’s financial system inquiry is likely to inform the direction of the Financial Advisers Act review but many of the changes suggested are already happening here.

Thursday, October 22nd 2015, 5:59AM

by Susan Edmunds

The Australian government this week responded to the Financial System Inquiry.

It said it wanted to strengthen the resilience of the financial system, improve the efficiency of the superannuation system, stimulate innovation, support consumers and strength regulator capabilities.

APRA has announced measures to improve the resilience of the banking system and will take more action on regulatory capital requirements. It will implement loss-absorbency capacity and leverage requirements in line with international standards.

The Australian Government is asking its Productivity Commission to develop efficiency metrics for the superannuation system and alternative models for allocating default contributions. It will also remove impediments to the development of retirement income products.

It says it will work to facilitate crowd-sourced equity funding and the issuance of simple corporate bonds and ensure regulation is technology-neutral.

It wants to lift the standard of financial advice by introducing minimum standards for advisers.

It also wants regulators to report on their capabilities and how they balance competition with their mandates. It will include competition in ASIC’s mandate.

PwC partner Sam Shuttleworth said the Australian government seemed to have appetite to tackle a problem that had been identified in KiwiSaver of people being defaulted into funds with the wrong risk profile. “It’s a missed opportunity for enhanced returns over a 20 to 30-year period.”

He said life stage-linked defaults could be something the Australian model would develop.

But he said many of the other things suggested were already well under way on this side of the Ditch. New Zealand is already overhauling product disclosure statements, working on making investment easier and giving investors the right information.

This country is also already doing peer-to-peer lending and equity crowd funding. “I see a lot of instances where the New Zealand market can put a tick next to. This is not underlining any areas for concern,” Shuttleworth said.

But he said the Financial Advisers Act review would likely take note of the Australian experience.

“When you undertake reviews you also look at what’s occurring globally. It’s not unreasonable to see what's happening in other jurisdictions. It’s another information source to do a comparison against.”

Commentator David Whyte, who has headed up insurance firms on both sides of the Tasman, said the Australian government had largely adopted every suggestion the Murray report made.

But he said New Zealand was unlikely to follow suit.

“I don’t think there’ll be a slavish following of what’s in the report by any means but they’ll take notice of it. I still don’t think the minister has a huge appetite for massive change of regulation or legislation but would like to see it become more aligned because it is then more effective.”

He said it would be an influencing factor rather than a direct one.

Tags: Financial Advisers Act