In the wake of the Final Report of the Financial System Inquiry, the financial services industry is now looking to the future and how that may be shaped in light of the Report’s recommendations.
The stated objective of the Inquiry was to make recommendations which foster an efficient, competitive and flexible financial system, consistent with financial stability, prudence, public confidence and capacity to meet the needs of the user. While the scorecard for the Inquiry in meeting this objective will arguably not be completely marked for some years to come, we are already on the road to seeing some of the recommendations realised. The enhanced register of financial advisers is, as we go to print, nearly upon us. In addition, ASIC is already underway with consultation on how it can adjust policy settings to facilitate innovative and electronic disclosure. As we look forward, what confidence can we draw from the Report’s recommendations that the future financial system will be enhanced and better able to suit our needs?
This special edition of The Wrap considers what lies ahead for the recommendations and their implementation. We explore whether some of the key recommendations can be effectively implemented and also whether there have been some missed opportunities. We also look forward to how other current and future regulatory initiatives may blend in with the recommendations.
In our last edition, we proposed that regulatory change may need to be considered the “new normal” and those businesses best placed to adapt will stand the greatest chances of success. In turning to the future of the financial system a similar story of agility and adaptability comes through. Previous financial system inquiries were the catalysts for major economic reforms in Australia including laying the foundations for the current financial services regulatory framework. The implementation of such reforms were only made possible with the appetite and will being there to support the changes. The Federal Government has undertaken a process of consulting on the Inquiry’s recommendations before making any decisions and called for submissions. In addition, a number of the submissions are recognised as being the responsibility of the financial regulators, ASIC, APRA and the RBA.
Careful consideration will need to be given to how implementing the recommendations may impact the broader system. However, we hope that just as financial services businesses have had to face regulatory change head-on in recent years, so too will those in charge of the policy settings not shy away from positive and possibly significant initiatives to support the future of the financial system.
Among the issues examined, we ask:
- What changes need to be built into the superannuation system in order to maximise its full potential?
- How can the industry tackle the ever growing challenge of managing customer data and cyber security?
- Does the prospect of a design and distribution obligation on product issuers and distributors bring with it potential unintended consequences?
- Does ASIC really need a product intervention power in light of its current regulatory toolkit?
- Has the Report missed an opportunity to make fundamental and long-lasting changes to our regulatory architecture?
- What challenges lie ahead with initiatives regarding enhanced competency of financial advisors and the public register and harmonising them with existing regulatory settings?
- Are we thinking broadly enough in tackling the underinsurance issue?
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