Regulatory pendulum has 'swung too far': FSC

Financial Services Council chief executive Blake Briggs has called out the government for strangling the financial services industry in red tape and bureaucracy, using a media address on Thursday night to highlight “systemic issues” across multiple sectors.

After congratulating and thanking the outgoing Financial Services Minister Stephen Jones, who announced his resignation from politics earlier in the day, Briggs took a swipe at both major parties for increasing the regulatory burden on financial services professionals and making the system more prohibitive for consumers.

“I would start with the fact that the regulatory pendulum for the superannuation, funds management and financial advice sectors has swung too far over the last decade – under successive governments,” Briggs said.

While the Hayne Royal Commission shone a light on many of the industry’s more ingrained problems, he said, it’s “not the sacred cow it once was” – a thinly veiled shot at the Delivering Better Financial Outcomes reform package that came out of the inquiry and its painfully slow rollout process. “It is appropriate for policymakers to now revisit and scrutinise the design and implementation of some of its recommendations and the impact of that regulation on the industry and its consumers,” he added.

As a result of the reform program, the industry and its consumers are now enduring the “costly overhang” of poor regulatory design and regulation, the council boss said.

Briggs was careful to spread the ire across both major parties, refusing to demarcate between the Liberal government’s initial handling of the commission’s findings and the subsequent government’s formulation and rollout of the reforms.

“It is never wise for an industry association to choose a side in politics in the months leading up to a federal election and I do not plan to start now,” he said. “Neither side of the political spectrum has clean hands when it comes to industry regulation. Some of the reforms that had their genesis in the Royal Commission were hastily implemented, some under the Morrison Government and others completed by the Albanese Government.”

The CEO also highlighted the inequity of the Compensation Scheme of Last Resort, which has been castigated by industry representatives as putting undue financial burden on financial advisers, who are set to pay a hefty annual bill for failures of product, not advice. The call out was underlined the next morning, when the CSLR announced a $70 million bill for advisers that is capped at $20 million.

I know there are many here in the room who will probably groan at the mention of the CSLR.

The fact is the growing cost of the CSLR makes the profession more unattractive for advisers, and the businesses that employ them, who are being saddled with higher regulatory levies to fund it. 

It is in the interests of the Government, ASIC, and consumer groups, as well as the industry, for the CSLR to be sustainable. Clearly that is not the case at the moment.

“This is not the scheme that industry envisaged when it was originally implemented, and it simply is not sustainable if we want a CSLR that enjoys the trust of the industry and general public.” Briggs said, while noting that simply expanding the scheme to other industries was not the answer and would simply “accelerate its unsustainable trajectory”.

“The FSC has been pushing the government to commission a Treasury led review of the CSLR to ensure that it is true to label – a genuine last resort – by restricting compensation to those who have lost money due to poor financial advice and simplifying it, and AFCA’s, processes to reduce the scheme’s bureaucracy.”