Chris Pearce
The Parliamentary Secretary to the Treasurer, Chris Pearce, has indicated that a significant degree of consumer education is needed before the large number of legacy products in the market can be reduced.
Speaking at an Investment and Financial Services Association (IFSA) member luncheon in Melbourne, Pearce said the current system whereby rationalisation could only be achieved via member consent was being undermined due to ignorance.
“Recent research indicates that member responses to rationalisation proposals are not always rational, even if the proposal is clearly in their interests. It appears that many members simply lack the expertise to assess and understand product rationalisation proposals,” he said.
“I consider that any solution to the problem, therefore, requires the industry to devote a high level of resources to educating these investors about the merits of product rationalisation, as much as it requires some element of incentive in moving investors out of legacy products,” Pearce proposed.
He said Treasury would continue to work closely with the Australian Securities and Investments Commission (ASIC), the Australian Prudential RegulationAuthority (APRA), and the Australian Taxation Office to address the issue.
Pearce also indicated that the proposal to define general and personal advice on the grounds of whether or not a product sales recommendation was involved required greater consideration.
“The sales recommendation proposal aimed to address some of the perceived imbalance that arises as a result of the current law’s definition of general and personal financial advice . . . The balance I wanted was to see a realignment of the law to the reality of the day-to-day marketplace,” he explained.
However, Pearce said a large portion of the responses regarding this proposal had indicated it would not produce the required result and the issue had been complicated by investor perceptions.
“Accordingly, I have tasked Treasury with finding a better solution, with endorsement from as many stakeholders as possible,” Pearce said.
