The global financial crisis clearly put the Australian funds management industry through our greatest stress test since the beginning of the managed funds industry just over 50 years ago — and our regulatory system has been found to be robust.
It has been yet another incredibly busy year for the Investment and Financial Services Association (IFSA). Since taking the helm in August, I have been truly amazed at the workload our people have been carrying in terms of submissions and other consultative forums.
Our advocacy effort on behalf of the superannuation, managed funds and life insurance industries has ensured plenty of travel to Canberra and regular meetings with the Government, the Opposition and crossbenchers. We have a sound working relationship with the Government and sit on several advisory and working groups.
IFSA has been working closely with the Rudd Government and Austrade to develop Australia as a regional financial services hub. As the fourth largest managed funds market in the world, Australia is recognised as being skilful and innovative in its approach to funds management and retirement savings — and this vital service industry is one we are keen to engage in internationally. As has been well publicised, two recent international studies highlight the strength of the Australian funds management industry.
Firstly, the results of the 2009 World Economic Forum Financial Development Report released this month demonstrated the resilience of the Australian economy and financial system. Australia was ranked as the number two financial centre in the world — up from eighth last year. Significantly, Australia was ranked first for financial market access.
The second international study, the Melbourne Mercer Global Pension Index, ranked Australia second in a comparison of 11 retirement income systems from around the world. Surely, as a nation, it is time we began to accentuate the positives of our managed fund industry — rather than continually pointing to the negatives. We can be proud of our achievements and we should celebrate the talent we have here in the Australian industry with more initiatives.
Dominating the pages of the financial and business press have of course been three major inquiries that could profoundly shape the future of our industry:
- Australia’s Future Tax System Review (the Henry Review);
- the Super System Review (chaired by Jeremy Cooper); and
- the Parliamentary Joint Committee Inquiry into Corporate Collapses and Financial Services and Products (chaired by Bernie Ripoll).
The first of these three reviews reported in November when Ripoll tabled the Parliamentary Joint Committee Report into Corporate Collapses and Financial Services and Products.
The committee’s recommendation, seeking a fiduciary duty for financial advisers, is a win for consumers and a win for the professional standing of the advice industry. The debate about conflicts of interest should now be put aside, enabling the industry to move forward from a solid professional foundation.
Fiduciary duty is, alongside the role of trustees, the highest professional standard and superior in all ways to any payments between product manufacturers and financial advisers.
The Ripoll, Henry and Cooper reviews will all play a vital role in maintaining Australia’s position as a global leader in retirement incomes.
As an industry, we have recognised that we should strive to continuously improve the financial services legislative framework to ensure it remains responsive to change.
To this end, in November this year, IFSA announced a Super Member Charter which, among other initiatives, aims to directly benefit consumers and bind IFSA members to move to a transparent fee-based model for financial advice starting from July 1, 2010.
The charter has three commitments to super fund members: informed choice, fairness and competition.
It contains recommendations to lift the bar for both public policy and industry practice. While some recommendations are for government and regulators to address, one very important set of reforms is for the industry to deliver.
Commencing in July 2010 there will be a fresh approach to the payment for financial advice in superannuation. This will boost consumer confidence in superannuation at a time when it is most needed.
Under the new regime, consumers will be empowered by knowing exactly how much they are paying for financial advice in their superannuation. Fund members will be able to negotiate the advice fees they pay — and to opt-in or opt-out of advice payments depending on their circumstances and needs.
This means that Australians can ‘turn on’ or ‘turn off’ financial advice fees in their superannuation and negotiate advice fees in super with their adviser.
Although we have come out of the financial crisis in a strong position, several policy challenges remain. The Henry and Cooper reviews are set to report to Government in the coming 12 months. IFSA will respond to these reviews in order to ensure the industry evolves in a way that continually improves our ability to build wealth for Australians, provide the incomes they expect in retirement and instil investor confidence in our industry.
John Brogden is chief executive of the Investment and Financial Services Association.
