John Brogden

The Financial System Inquiry released on Sunday by the Government lays the foundation for a strong and efficient financial system for Australia.

John Brogden, CEO of the Financial Services Council (FSC) said: “The FSC supports the emphasis on the need for greater competition and transparency in superannuation and for improvements to retirement incomes policy.”

“The FSI has outlined sensible and strong reforms the majority of which we have advocated and support,” Mr Brogden said.

Superannuation

Choice of fund

“The FSI strongly endorses the principal of a consumers’ right to choose their superannuation fund. This must be a foundation of superannuation in compulsory system.”

The report states “…everyone should be able to choose the fund that receives their Superannuation Guarantee contributions.”

“The FSC will recommend to the Government that this be applied across the industry,” Mr Brogden said.

Governance of superannuation funds

Mr Brogden also said: “Superannuation Boards must be independent and free of vested interests from unions and other bodies. We strongly support the recommendation to require public offer superannuation funds to have a majority of independent directors and an independent chair.

“This is already a standard required of Australia’s’ retail superannuation funds who are members of the FSC.

As the FSI states: “Including independent directors on Boards is consistent with international best practice on corporate governance.”

Fees and default superannuation

“Fees are already coming down in superannuation,” Mr Brogden said.

“Research by Chant West in 2014 shows the average fees for MySuper funds are already 85 basis points (0.85%).”

“Fees can come down further through increased competition.”

“However the FSI fails to recognise that maintaining the Fair Work Commission closed shop in default super will stymie competition and further reduction in fees.”

Retirement Incomes

Retirement products

“The FSC strongly supports the FSI’s recommendation that superannuation funds are required to select an income product for their default members at retirement.”

“Australia must have a comprehensive retirement outcomes policy, not simply a superannuation accumulation policy.”

Financial Advice

Adviser Competency

“The FSC has consistently advocated for increased competency standards for financial advisers. We support this recommendation.  However we await the Parliament’s current inquiry into competency and education standards.”

Public Register for Financial Advisers

“The FSC strongly supports a clear and transparent register for financial advisers.

Relabelling General Advice

“The FSC recommended to the FSI that “General Advice” should be relabelled to “General Information” to help provide greater consumer clarity. We are pleased our recommendation has been adopted.”

Powers to ban individuals

“The FSC supports increased powers to allow ASIC to ban individuals from managing a financial services business. This will ensure that ASIC can remove people from the industry who fail consumers.”

Taxation

“We support the FSI’s recommendation for the Government’s Tax White Paper to consider taxation of financial services.”

Financial Services Trade

The FSI recommends changes to the Managed Investment Schemes sector, including strengthening regulators’ focus on competition in the financial system, and identifying barriers to cross-border provision of financial services.

“The FSC welcomes the recommendation to strengthen regulators focus on competition including identifying barriers to cross-border provision of financial services.   We are disappointed that the report does not elaborate further on international competitiveness of funds management,” Mr Brogden said.

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“50 Best Fintech Innovators” report released

A global report launched yesterday calls out the world’s ‘50 Best’ financial technology innovators. The report, ‘50 Best Fintech Innovators’ is the result of a collaboration between AWI, KPMG Australia and the Financial Services Council (FSC) to identify those companies most likely to succeed due to innovative use of technology and driving of disruption within the financial services industry.

“The launch of the ‘50 Best’ list could not be more timely,” explained Ben Heap, CEO and Managing Director of AWI. “The financial services industry is poised at the brink of changes that will forever alter the way customers view us, what they expect from us and how they interact with us. And Fintech is the driver of that change.”

Mr Heap said that the genesis of the report was the desire of AWI, FSC and KPMG Australia to recognise and celebrate the vital role that up-and-coming Fintech companies are playing in reshaping the financial services industry. He cited massive increases in Fintech funding globally, which has more than trebled over the past five years and is now at an estimated US$3 billion annually along with unprecedented levels of innovation in the financial services industry over the past year as further evidence of big changes ahead.

“We have crossed the precipice with Fintech. Disruption is underway in the financial services market in Australia and globally,” Mr Heap said.

“And we’re not just looking at improved customer experience and the advent of new products, services and solutions within the industry itself. We’re also looking at a flow-on effect to some of the world’s major financial centres. London and New York are recognised as centres of Fintech innovation, and Sydney is a major contender for similar status as activity here ramps up.”

The inaugural ‘50 Best’ innovators were selected following extensive global research and analysis based on data relating to four factors:

• total capital raised
• rate of capital raising
• degree of sub industry disruption
• degree of product, service, customer experience and business model innovation (a subjective ranking from each member of the judging panel).

“These assessment criteria reflects the fact that venture capital invested is a relevant measure of innovation – which in turn fuels enduring competitive advantage. Venture capitalists seek this enduring competitive advantage over and above anything else,” explained Mr Heap.

John Brogden CEO of the FSC, highlighted the vital role of innovation in the financial services industry.

“Financial services industries globally must focus on innovation to drive productivity and economic growth. In Australia, we have had an intense period of regulation. Now this is over, the industry can focus on what it does best – providing new and better products and services that address the changing needs of consumers,” Mr Brogden said.

“As Australia’s largest industry, financial services has an enormous opportunity to lead on innovation. If the calibre of companies and business ideas in this list is anything to go by, we can expect that many financial services businesses will be disrupted – positively – in the future.”

KPMG Australia compiled the data behind the list and engaged its global network of member firms to source nominations.

Jacinta Munro, Partner in Investment Management at KPMG Australia said “The companies that made it onto the ‘50 Best’ list all stand on their merits. However there are many other exciting and creative Fintech companies around the world and the sheer pace of growth in the industry means the list is likely to change in the next 12 months. For this reason we are committed to updating it annually.”

The ‘50 Best’ list is comprised of Fintech start-ups internationally, ranging from the US, UK, Israel, Germany, Sweden, Scotland, Israel, Canada, India and New Zealand. There were also seven Australian companies on the list as outlined below.

Ian Pollari, Head of Banking at KPMG Australia said “It is important to acknowledge, raise awareness and publicly recognise the growing list of successes both globally and locally. The diversity of this list reinforces that Fintech is a global phenomenon and it is particularly pleasing to see Australia start to mobilise around this area.”

Click here for the full ‘50 Best Fintech Innovators’ list.

* Companies in the ‘Ones to Watch’ section of the report.

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John Brogden

Disallowance of the Future of Financial Advice regulations will cause havoc for consumers and financial advice providers, the Financial Services Council said yesterday.

John Brogden, FSC CEO said: “This disallowance motion will create a legal quagmire that will lead to disruption and unnecessary costs and will reduce affordability and accessibility of financial advice.”

“Overturning the FoFA regulations at the eleventh hour will do more harm than good,” Mr Brogden said.

“The market impacts of an immediate disallowance would create a legal quagmire, millions of dollars in business disruption costs and reduce affordability and accessibility of financial advice to Australians.

“We are calling on the Senate to vote against the disallowance motion today to allow Parliament and the industry time to consider the proposals and to address any concerns.”

“The industry has been working under the current FoFA arrangements since 1 July. To turn around and just throw them out is irresponsible.”

“The market impacts of disallowance have not been considered by the Senate.”

The Government’s regulatory impact statement estimates that FoFA in its current form is achieving ongoing compliance cost savings of around $191 million per year, as well as once-off implementation cost savings of around $88 million.

Mr Brogden also said: “The laws FoFA we have in place today have the strongest possible consumer protections. These have never been watered down.”

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John Brogden

It’s official: New South Wales is now the fastest growing state in Australia. This is due to a booming growth in financial services which accounts for 11.5 per cent of the NSW Gross State Product (GSP).

The same applies in Victoria where financial services accounts for 10.4 per cent of GSP. These statistics have been revealed in a new report on the state of the financial services industry in Australia commissioned by the Financial Services Council and UBS Global Asset Management – State of the Industry: Financial Services and SMSFs in Australia.

John Brogden, CEO of the Financial Services Council said: “Financial services is now Australia’s largest industry accounting for nine per cent of GDP − more than mining and manufacturing.”

“While growth in other industries is slowing down, financial services is continuing to grow,” Mr Brogden said.

“Our report shows that financial services is making a significant contribution to the Australian economy. It pays more corporate tax than any other sector, employs more than 400,000 people –most are well-remunerated and well-education − and contributes $130 billion to the economy each year.”

“Yet financial services it is still to be recognised as an industry in its own right,” he said.

The FSC-UBS report also shows that the way that Australians manage their superannuation is having an ongoing impact on the growth of Australia’s emerging services economy. From a relatively small population of 23 million, Australia has the fourth largest pool of superannuation in the world.

“With the right policy settings, Australia has an enormous capacity to increase financial services exports,” Mr Brogden said.

According to the FSC-UBS report, exports of financial services increased by 43 per cent in 2012-13 − from $2 billion to $2.9 billion.

Bryce Doherty, Head of UBS Global Asset Management in Australia said: “Australia has a real expertise in financial services, particularly in funds management and superannuation that is highly regarded around the world.”

“There is a huge opportunity for us to both export our investment expertise offshore as well as enable access for Australians to international investment opportunities. We are very supportive of the work done by the FSC to develop the Asia Region Funds Passport to facilitate mutual recognition between Australia and other economies.”

The pilot program is expected to be up-and-running by 2016.

Key findings:

Financial Services

• largest sector of the Australian economy
• contributes over $130 billion to GDP each year
• NSW is the fastest growing state: Financial Services = 11.15 % of GSP
• pays the most corporate tax − $20 billion per annum
• employs more than 400,000
• jobs are highly skilled, and highly remunerated
• includes $1.85 trillion in superannuation = 116 % of GDP
• exports grew 43 % in 2012-13 − $2 billion to $2.9 billion

SMSFs

• $550 billion = 1/3 of Australia’s superannuation pool
• $320 billion in 2009; $550 billion today = 30% growth
• 60% of SMSF owners have plans or have started planning for retirement
• 59% have an SMSF for control and choice
• a typical SMSF has 35% invested in deposits/cash
• 15% may add international shares to their investment portfolios

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Sally was a broadcaster and journalist before entering the corporate sector.  For the past eight years she has been director of media and public affairs for top 50 ASX Listed company, Coca-Cola Amatil.

Greg Cooper, FSC chairman, said: “Sally brings a strong background in media and corporate reputation to the FSC.”

“Her skills and experience will be critical as financial services moves from an era of the most significant changes in regulation and legislation in its history to its next phase of being an export and growth industry for Australia.”

Ms Loane said: “Financial services is the engine room of the Australian economy.”

“As Australia’s largest industry – larger than mining and manufacturing – financial services is integral to Australia’s economic growth. There is tremendous scope to cement financial services as an industry in its own right,” she said.

“Building trust and confidence in financial services will be a significant focus for the immediate future of the industry.”

“My initial mandate will be to focus on three key areas for the future of financial services.

“The first will be to establish a platform for Australia to develop a retirement outcomes policy. This is critical as Australians are living longer and need to ensure they can live comfortably in retirement.”

“The second, to ensure financial services has a voice of influence in the debate on the tax and federation white papers − an area which is well overdue for reform.”

“And the third is to contribute to Australia’s future economic  growth through building the right regulatory architecture so Australian can develop a significant presence in  the Asian Region,” she said.

Ms Loane is a director of Waratahs Rugby P/L and SCEGGS Darlinghurst, is deputy chair of the Committee for Sydney, Governor of the Cerebral Palsy Research Foundation and a member of the Salvation Army’s Media Advisory Board.

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John Brogden

The Financial Services Council strongly supports the Register of Financial Advisers announced last week by the Government. The register has significantly expanded the initial proposal to include details on financial advisers and their employers which has not previously been available.

John Brogden, CEO of the FSC said: “The Government is delivering on its commitment to increase information to consumers about financial advisers.”

“The register will provide consumers with the relevant and important details of financial advisers so they can make informed choices.”

“It is critical that consumers know as much as they can about the adviser they are considering engaging. We are pleased that the register will disclose the ultimate owner of the licensee and the parent company. This will ensure full transparency,” Mr Brogden said.

“Consumers will also be able to use the register to find out if an adviser has been subjected to bans, disqualifications or enforceable undertakings.”

Mr Brogden also said: “Greater transparency and disclosure will help to build trust and confidence in the financial advice industry.”

“We need more Australians to get financial advice. Currently only 20 per cent of the population seeks financial advice,” he said.

“Australians are living longer than ever before and they need to know that the savings and investments they make will sustain them throughout their lives. Good financial advice will help to achieve this.”

“Significantly improved adviser education, increased ASIC powers and greater disclosure of experience and ownership are needed to increase public confidence in financial advice,” Mr Brogden said.

“The register is an important service to consumers which the industry will be pleased to fund.”

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The working group will address issues such as the quality of advice, product design and remuneration structures which were raised in ASIC’s Review of Retail Life Insurance and Advice report released on 9 October.

As independent chair, Mr Trowbridge will convene the working group and facilitate industry and policy solutions. The group will specifically address retail life insurance product structures, financial advice and distribution practices.

Brad Fox, CEO of the AFA said: “Mr Trowbridge brings extensive knowledge of Australia’s regulatory system to the Working Group. This will be pivotal in assisting the group to develop sustainable and workable solutions for stakeholders.”

Mr Trowbridge’s experience spans the private and public aspects of the financial system and ranges from competition in retail financial services, to capital structure issues, system stability and regulation. From 2006 to 2010 Mr Trowbridge was one of three Members of APRA’s executive where he was responsible for life and general insurance and executive remuneration. He was a pioneer of general insurance actuarial work in Australia and held senior management roles with QBE and Suncorp. In 1981 he started Trowbridge Consultingwhich became a leading actuarial firm in Australasia and which merged with Deloitte in 2000. Also, after merging with a US firm (Tillinghast) in 1984, he gained extensive experience in life insurance and, on deregulation of banking.

Mr Trowbridge said: “The ASIC report points to some important issues for consumers and the broader Australian community. These are complex and difficult issues for the life insurance and advice industries to solve.”

“I applaud the Association of Financial Advisers and the Financial Services Council in taking the initiative to set up a Working Group which will make a concerted effort to find durable solutions in consultation with all stakeholders.”

“I am delighted to contribute to this initiative through leadership of the Working Group,” he said.

The Working Group will include three representatives from the FSC and three from the AFA. The FSC’s representatives will be: John Brogden – FSC CEO; Andrew Hagger – group executive, NAB Wealth and CEO of MLC Limited; and Geoff Summerhayes – CEO of Suncorp Life.  AFA representatives will include: Brad Fox – AFA CEO; John de Zwart – CEO of Centrepoint Alliance and Jeff Thurecht – AFA NSW State Director.

A public report on the group’s initial findings will be released in mid-December and a final report in February 2015. The Working Group will consult with the regulators and Parliament on its recommendations.

John Brogden, CEO of the FSC said: “We take the findings in the ASIC report very seriously.”

“It is important that consumer trust and confidence in financial advice and products is restored to ensure Australians have sufficient life insurance cover.”

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John Brogden

Industry associations representing advice and life insurance will form a working group to address the issues raised by the ASIC report into life insurance released yesterday.

The Association of Financial Advisers (AFA) and the Financial Services Council (FSC) will jointly convene a working group to specifically address retail life insurance product structures and distribution practices. An independent chair will be appointed to convene the working group and facilitate industry and policy solutions.

John Brogden, CEO of the FSC said: “It is critical that remuneration models in the life insurance industry are sustainable and practical for consumers and the industry.”

“The ASIC report requires a serious response from the industry. We have formed a working group to achieve this,” Mr Brogden said.

“The working group will consult with the regulators and Parliament on its solutions.”

“The financial advice and life insurance sectors will work together to carefully examine the findings and recommendations in the ASIC report and to assess all options to improve market practices and sustainability.”

Mr Brogden said the working group will produce an initial report on its findings within two months and a final report early next year.

“As an industry we will review the ASIC report and provide a considered response.  We note ASIC will take enforcement action,” he said.

“Consumer trust and confidence in financial advice and products is essential to ensure Australians have sufficient life insurance cover.”

“Australians are chronically underinsured. Life insurance helps protect Australians against the social and economic impact of premature death, illness, injury or disability that impacts their ability to earn an income – arguably the most important financial asset a person has.”

“The contribution of private life insurance will be critical for the Australian economy as our population ages and workforce declines.”

Mr Brogden also said: “In recent years, policymakers have treated life insurance in a bipartisan manner.“

“The ASIC report notes: The FOFA reforms did not extend the ban on conflicted remuneration to individual life insurance sales under personal advice. That is, commission payments for life risk insurance products (with the exceptions in paragraphs 42(a)–42(b)) are exempted from the ban on conflicted remuneration.”

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John Brogden

The Financial Services Council is advocating for the establishment of a statutory, independent, Advice Competency Standards Board (ACSB) for financial advisers to rebuild the trust of consumers in financial advice, John Brogden, CEO of the FSC said yesterday.

“The advice industry needs an external, independent governing body,” Mr Brogden said. “The best way to regain trust is to have an independent statutory body in control of education and  professional standards.”

“Self-regulation is no longer a credible option for establishing higher standards,” he said. “We have recommended to the Parliamentary Joint Committee inquiry into adviser competency and the Murray Review that an independent body be established to oversee adviser competency standards, education and professional conduct.”

“It is critical that the industry redefines itself through robust oversight and high competency standards to rebuild the trust and confidence of consumers so more Australians seek financial advice.”

“Significantly improved adviser education, increased ASIC powers and greater disclosure of experience and ownership are needed to increase public confidence in financial advice.”

The ACSB would replace current low entry points such as RG 146. The Board would comprise key industry stakeholders such as ASIC and the Tax Practitioners Board and would have industry representation determined by the Minister.

Mr Brogden also said: “The ACSB will be the point of integration for regulation which is fragmented and cuts across the Tax Agents Services Act and the Corporations Act.”

“Under this model, advisers will have robust competency and professional standards to complement their legal duties. This will end confusion and increase trust and confidence in the industry,” Mr Brogden said.

Read the FSC’s submission here to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry.

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John Brogden

The Financial Services Council has calculated that working Australians will have $128 billion less in their superannuation savings by 2025 due to the delay of 12 per cent superannuation guarantee charge for seven years.

This follows the government’s revised schedule for the SGC to enable the repeal of the Mining Resources Rent Tax.

John Brogden, CEO of the FSC said: “It is very disappointing that the government has again slowed the increase in the Superannuation Guarantee to 12 per cent.”

“We are concerned it could exacerbate the nation’s low savings rate and that costs will be passed on to future generations.

“Australia has a savings gap of $727 billion.  The delay of revised schedule would result in a widening of the gap as Australians will have $128 billion less in superannuation contributions by 2025.”

Superannuation is significantly reducing the pressure on the Federal Budget.  This year it will save the government $6 billion in Age Pension costs. If it continued to 12 per cent at the current schedule, this would be $11 billion per annum by 2030.

“Australians are living longer and need to plan for their retirement with certainty.”

“With increasing the financial pressures of an aging population, now is not the time to slow down on superannuation.”

“The changes announced will reduce the likelihood that people can retire comfortably and that the costs of an aging population will be passed on to the next generation.

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