FSC Response to Financial System Inquiry Interim Report

John Brogden

The Financial Services Council yesterday welcomed the interim report of the Financial System inquiry.

Superannuation

The FSC agrees with Murray’s commentary that policy settings in superannuation lack stability. John Brogden, CEO of the FSC said: “Consumers need certainty and stability in policy settings to have trust and confidence in the system”.

“The inquiry has appropriately recognised this as a critical element in superannuation policy.” “The MySuper system, although less than 12 months old, has already seen a reduction in superannuation fees. As the FSI report suggests, MySuper needs more time to demonstrate that it can deliver on its objectives,” Mr Brogden said.

“We believe that the Australian superannuation system has returns that are comparable and in most cases better, than equivalent economies.”

The inquiry’s criticisms of liquidity and choice in superannuation however, fail to recognise the need to give fund members choice within a compulsory system.

“If you force people to save, you must give them the choice on how they save.”

We also note that the report has called for a broad debate on retirement income policy.

Mr Brogden said the FSC has advocated for a debate on the policy settings surrounding the critical retirement phase and supports this recommendation. Insurance

The report appropriately acknowledges the important role insurance plays for individuals and the economy.

“The report acknowledges that underinsurance ultimately ends up as a cost to government. We look
forward to engaging in detail with Inquiry on policy settings to reduce underinsurance, said Mr
Brogden.

Advice

The FSC welcomes the Inquiry’s observation that financial advice is critical for Australians, particularly in an environment of compulsory savings.

We look forward to providing a detailed submission supporting the discussion on increased competency and educational standards for financial advisers, the introduction of a register and increased powers for ASIC.

Importantly, the Inquiry acknowledges that there is a significant demand for affordable, low cost scaled advice.

Mr Brogden said: “We support increased quality, accessibility and affordability of financial advice.

Millions more Australians need to take advice to grow their wealth and secure their retirement.”

Financial Services Trade

The interim report identifies the significant opportunity of Australia being in the right place at the
right time.

“The report recognises the importance of integrating Australia’s financial services system into the Asian region and the need for the government to take a lead in coordination.”

It highlights that Australia’s financial regulation is very different to Asian jurisdictions and the need for harmonisation.

Mr Brogden also said: “The inquiry can play a critical role in increasing financial services trade in Australia, particularly in areas such as the Asia Region Funds Passport.”

Consumer Outcomes

The report has made important observations with respect to disclosure and technology. “We commend the inquiry for its focus on how consumers can better access and interact with the financial system. Focusing on the increasing use of technology and more effective disclosure are critical areas for further discussion,” Mr Brogden said