Should ASIC be a regulator or an educator?
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The Australian Securities and Investments Commission (ASIC) has been criticised in recent years for failing to intervene before the collapse of financial services companies, including Westpoint and Storm Financial.
ASIC has long said increasing the financial literacy of consumers is one of its strategies to reduce the impact of poor investment decisions. And ASIC deputy chairman Jeremy Cooper yesterday told the SPAA conference that education would be an increasing priority for ASIC going forward.
In the same speech in which he announced an upcoming shadow shop on financial planners, Cooper said 2009 would be “a pretty big year for the regulators and ASIC as well”.
Cooper said there would be a bigger role for ASIC in conveying investment concepts to retail investors, including the trustees of self-managed super funds.
Cooper said in doing so, ASIC would be raising the bar for advisers and making it more difficult for those few advisers out there to give poor advice.
Cooper said ASIC is continuing to work on the FIDO and Understanding Money websites, and was looking at creating an “online generic advice tool” which could be available for use by July 1, 2010.
This would service the “80 per cent of investors who have no relationship with an adviser”, ASIC said.
In regards to the advice given to self-managed super fund trustees, Cooper said ASIC’s focus was shared between the advice given to trustees on the establishment of the funds, and whether ongoing advice is appropriate and understood by the trustee.
On other matters, Cooper said another big concern for ASIC in the current environment was “well-known products that have changed their spots” — referring directly to Australian real estate investment trusts (AREITs).
He said the AREIT sector “seems to have imploded”, breaking many of the investment rules in the process, especially in relation to over-leveraging, poor corporate governance and buying assets in poorly understood markets.
Cooper said he believes there should be a return to the use of Commonwealth Government bonds as the “centre of the dartboard” of portfolios for retail investors.
“For too long this vital benchmark has been obscured,” Cooper said.
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