Professor Deborah Ralston

Technological innovation is underpinning a revolution in how financial services are delivered in Australia, says Professor Deborah Ralston, Executive Director of the Australian Centre for Financial Studies (ACFS).

“Today this technology enables wealth managers to deliver financial advice to three million people annually, to oversee the administration of 20 million superannuation member accounts and to manage investments totalling $1.8 trillion on their behalf – and this revolution is still in its infancy,” she says.

“For example, how far away is the integration of advice and investment platforms, how will the regulators respond to this technological revolution, and will access to individual superannuation accounts in APRA-regulated funds lead to a decline in the growth of SMSFs?”

These are just some of several themes about the role of technology in financial services that will be teased out at morning briefing session being sponsored by ACFS and EY on 14 May in Sydney. It is titled “Riding the digital wave: are wealth platforms about to take off or wipe out?”

Speakers include former Labor Superannuation Minister Nick Sherry, EY Partner Jeroen Buwalda, ASIC Senior Executive Leader Ged Fitzpatrick, SuperIQ CEO Andrew Bloore and Colonial First State Executive General Manager, Linda Elkins.

Buwalda says wealth managers are facing unprecedented opportunities and challenges as a result of the increasing uptake and convergence of consumer technologies.

“In an environment where evolving technology makes it easier than ever to engage with customers, providers need to ensure they are making the best use of their platforms – whether collaborating with clients, advisers of platform partners in real time or managing regulatory compliance obligations more effectively,” he says.

Prof Ralston says every day we hear about new innovations in technology and how they are changing the way we live; smart phones, tablets and social media are already ensconced in our daily routines and wearable devices and 3D printing are almost upon us.

“These massive changes obviously beg the question about how wealth platforms are responding to technology innovation to better meet the needs of customers, trustees, administrators and asset managers.”

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These risks have been highlighted since 2008 when several operators of agribusiness schemes failed, causing investors significant losses. The collapses highlighted features of agribusiness schemes and raised concerns about whether these features and associated risks were adequately disclosed to investors.

Regulatory Guide 232 Agribusiness managed investment schemes: Improving disclosure for retail investors (RG 232) outlines five benchmarks and five disclosure principles that apply to all agribusiness schemes.

ASIC’s Senior Executive Leader Investment Managers & Superannuation, Ged Fitzpatrick, said, ‘ASIC’s new disclosure benchmarks for agribusiness schemes are one component of a multi faceted approach to holding the gatekeepers in this sector to account. Our initial focus was on surveillance of the sector when problems emerged and our investigations into the collapses of a number of agribusiness responsible entities are continuing.

‘ASIC has now introduced disclosure benchmarks to ensure people considering investing in agribusiness schemes are aware of the associated risks. Responsible entities of agribusiness schemes must ensure people better understand what they are getting into before they invest. ASIC’s priority is ensuring investors and financial consumers are confident and informed before investing in these schemes’, he said.

RG 232 is the latest in the series of ‘if not, why not’ disclosure benchmarks for sectors that pose particular risk to investors and financial consumers. It follows the issue of disclosure benchmarks for the infrastructure and over-the-counter contracts for difference sectors in Regulatory Guide 231 Infrastructure entities: improving disclosure for retail investors (RG 231) and Regulatory Guide 227 Over-the-counter contracts for difference: Improving disclosure for retail investors (RG 227).

Agribusiness schemes must disclose whether they meet the benchmarks and if not, why not. ‘Why not’ means explaining how they will deal with the business factor or the issue underlying the benchmark. Agribusiness schemes pose particular risks because unlike many other types of managed investment schemes, they don’t generally use a traditional unit trust structure.

For tax reasons, many agribusiness schemes are structured so that investors operate their agribusiness investment in their own right. Investors enter into contracts with the responsible entity or other parties to perform all the cultivation and management activities associated with the investor’s agribusiness enterprise. Investors need to understand these complex arrangements as an investment in an agribusiness scheme is a long-term commitment and investors may have ongoing obligations in relation to the operation of their agribusiness enterprise.

RG 232 also outlines the standards ASIC expects responsible entities to meet when advertising agribusiness schemes to retail investors and guidance as to clear, concise and effective disclosure of the benchmark and disclosure principle information. Responsible entities of agribusiness schemes should disclose the benchmark and disclosure principle information in any product disclosure statement dated on or after 1 August 2012.

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