A group of industry bodies has called on the government to act on reform proposals put forward in its consultation package on the Shield and First Guardian master fund failures that have broad industry support and to take note of those that attracted widespread opposition.
The Joint Associations Working Group (JAWG) said the consultation, which included papers dealing with funding the Compensation Scheme of Last Resort (CSLR), consumer protections in super and curbing lead generation, dealt with “interconnected policy issues spanning fund design and governance, distribution practices, licensee and investment governance, compensation arrangements and regulatory oversight”.
As a result of these issues, the JAWG stated the priority of any reform should address gaps or weaknesses in the regulatory framework rather than duplicating obligations that already exist.
“Effective oversight and enforcement by the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority remain critical to ensuring existing legal obligations and consumer protections operate as intended,” the joint bodies said.
“At the same time, the JAWG recognises that the events surrounding Shield and First Guardian have highlighted areas where targeted reform is warranted and, in those areas, we are pleased to express our collective support.”
The collective stated while its member associations had taken different individual positions on certain proposals, there was consensus in a number of areas, including improvements to the sustainability of the CSLR and in which they strongly supported limiting compensation to capital losses only.
“It is not consistent with the concept of a scheme of last resort to compensate consumers for hypothetical investment returns, particularly where those amounts are ultimately funded by levy-paying entities that had no involvement in the underlying misconduct,” it stated.
Other areas of change that were supported were enabling the CSLR to deduct offsets from compensation payments received through other proceedings and stronger mechanisms to recover unpaid Australian Financial Complaints Authority determinations.
The group opposed any moves to introduce mandatory waiting periods when changing superannuation funds as this would make that process more complex while not addressing the harms stemming from the Shield and First Guardian failures.
Opposition was also flagged to a proposal to prohibit advice fee deductions for switching-related advice, as well as a recommendation to remove or restrict an exemption from the hawking prohibitions where personal advice is provided.
The group stated the first could limit the ability for superannuants to receive professional help and the second could restrict legitimate advice conversations where advisers identified issues relevant to a client’s financial well-being.
“The JAWG considers that Treasury’s focus should be on identifying and enforcing the law where misconduct has occurred rather than imposing additional process requirements that apply equally to compliant advisers and consumers,” it added.
The JAWG is comprised of the Boutique Financial Planning Principals Association, Chartered Accountants Australia and New Zealand, CPA Australia, Financial Advice Association Australia, Financial Services Council, Institute of Public Accountants, Licensee Leadership Forum, SMSF Association, Stockbrokers and Investment Advisers Association and The Advisers Association.
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason