The government’s response to the Senate Economics Committee inquiry into the performance of the Australian Securities and Investment Commission, announced this morning, is manifestly inadequate.
The regulation of financial planning in Australia is broken — demonstrably so. The committee inquiry, which primarily focused on one particular scandal in the Commonwealth Bank, revealed in painful detail just how inept ASIC has been. Those revelations occurred at the same time that the government was restoring conflicted remuneration to the business models of financial planning — at the behest of the big banks and AMP — and significantly reducing the funding of ASIC, which is in the process of shedding one in six of its staff.
ASIC says it will focus its surveillance on the financial planning arms of the big banks, AMP and Macquarie Bank. That is as it should be. In addition, the government has announced a new register of financial advisers that will enable clients and potential clients to check the credentials of planners. The move is welcome, but is no substitute for addressing the conflicts of interest at the heart of financial planning in Australia. Acting Assistant Treasurer Mathias Cormann has rejected the committee’s call for a royal commission into the Commonwealth Bank, saying there have already been a number of inquiries and further ones are unnecessary. He’s correct — but only if the government seriously heeds the lessons learnt from previous inquiries, particularly around the resourcing and culture of ASIC — especially the extent of industry capture.
Cormann says the government is currently considering a user-pays model for increasing funding for ASIC. Resolving the problem of inadequate funding of the finance industry regulator should be urgent business for the government. A register, an underfunded regulator and an “all care, no responsibility” approach from the government is not good enough for an industry that will in coming years be worth $2 trillion and be critical to all Australians’ retirement incomes.