The SMSF Association has identified five areas the federal government needs to address should it wish to implement meaningful consumer protection reform relating to the financial services industry.
The industry body has communicated its position in anticipation of the National Press Club address Minister for Financial Services Daniel Mulino will be making later this week, where he is expected to announce a number of consumer protection measures in response to the Shield and First Guardian collapses.
Specifically, the SMSF Association is calling on the government to undertake actions that will target the true causes of consumer harm without unnecessarily restricting their available choices, provide stronger proactive regulatory oversight and surveillance, establish a genuine compensation scheme of last resort whereby the related funding mechanism will more fairly apportion the cost of poor advice and product failures, enhance consumer access to quality and affordable financial advice, and ensure the sustainability of the financial advice sector, given many participants in it are small businesses.
In addition, association chief executive Peter Burgess acknowledged legislative reform is only one of many aspects pertaining to a proper consumer protection framework.
“It must be coupled with proactive surveillance and stronger oversight, rather than a reliance on investigation and enforcement after the consumer harm has occurred,” Burgess noted.
“Proactive oversight and surveillance provide a stronger deterrent than the mere possibility of investigation and enforcement after the damage has been done.
“Directing regulatory resources towards engagement, oversight and surveillance would also help ensure the levies paid by AFS (Australian financial services) licensees through the ASIC (Australian Securities and Investments Commission) industry funding model are used effectively, rather than being swallowed by escalating enforcement costs after investors’ money has already been lost.”
He pointed out episodes causing consumer harm and the ever-growing cost of unpaid compensation claims can only be reduced through targeted legislative reform combined with a stronger focus on how the existing regulatory framework can be more effectively enforced.
“It’s what we are hoping to see when the Minister unveils his reform package later this week,” he said.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin