The Financial Services Inquiry (FSI) has been urged to consider the cumulative effect of recent regulatory change on the financial services sector in a response to the release of its Terms of Reference.
The FSI has also been asked to consider the effectiveness of external dispute resolution (EDR) schemes and the introduction of Self-Regulatory Organisations (SROs) within the sector in submissions made by industry bodies.
A number of groups, including the Financial Planning Association (FPA) and Actuaries Institute, welcomed the ‘root and branch' examination of the Australian financial services system — the first since the introduction of the Financial Services Reform Act in 2003.
However CPA Australia stated in its submission that the recent raft of regulatory change should be examined from a systemic viewpoint, stating that single regulations were not the issue but rather "the cumulative impact from all regulators that can have a significant negative impact on the competitiveness of Australian firms".
The FPA also requested the inquiry consider the role of SROs in regulating the sector. It said that "depending on their scope, structure, and responsibilities, they could deliver different economic, social, and cultural outcomes".
"Their most valuable characteristic is their potential to develop and promote ethics, professionalism, and transparency — all of which would serve the financial sector and the national interest," according to the FPA submission signed by chief executive Mark Rantall.
The Association of Financial Advisers (AFA) called for a review of the effectiveness of financial advice related EDRs as well as availability and affordability of professional indemnity insurance. It also called for a consideration and alignment of education standards for financial advisers across the Corporations Act and Tax Agent Services Act (TASA) regimes.
AFA also asked the FSI to consider a review of financial literacy in the face of a very active direct insurance market — and following the launch of MySuper. AFA stated MySuper would "have significant implications for a very large number of superannuation fund members, but there has been no consumer awareness campaign".
Industry Super Australia (ISA) stated that it supported the focus on the costs and fees of financial services by the inquiry but questioned the overall economic benefit from high levels of intermediated financial services.
"The economic functions of financial services are typically of an intermediation nature, and accordingly generally do not directly result in end-user consumption or savings.
"Beyond a certain point, there are diminishing efficiency gains in the real economy from finance, and in fact are crowding out or a drain on real economic resources occurs due to excessive intermediation," it said.