ASIC is deliberating on how to treat advice in its new role as the primary conduct regulator for superannuation funds, with commissioners saying the regulator is facing the difficulty of consumer confusion around ‘general’ and ‘personal’ advice.
The finance watchdog’s commissioners, including chair James Shipton and deputy chairs Daniel Crennan and Karen Chester, spoke on a panel at the ASIC Annual Forum in Sydney last week.
ASIC will be policing super as a result of the royal commission, working with APRA in a dual regulation ‘twin peaks’ model.
The body’s legislative reforms around super launching its full capacity as a regulator for the sector have all yet to be approved. To date, ASIC gained power in enforcing penalties in March.
Ms Chester said the regulator is considering two areas in its regulation of super, including the structure of financial advice business models.
“One of them is retirement products, perhaps what role could government bear in making sure that they’re objective and cordial advice,” Ms Chester said.
“We’re moving into a world where business models within financial institutions are changing.
“At the moment there is an important distinction between personal and general advice and this is going to matter a lot to land that public policy issue, when we’re looking down the barrel at a lot of people with low balances retiring.”
In March, the regulator published a report saying that consumers confuse general and personal advice, with nearly 40 per cent of survey respondents being unaware that advisers are not required by law to act in their best interests.
When asked about how ASIC is planning to proceed for people with low super account balances and whether they’ll make it viable for them to seek advice, commissioner Danielle Press said the regulator had to be ‘careful’.
“Wealth managers say the average super fund balance in Australia is very low, $69,500 for women and $112,000 for men,” Company Director magazine editor-in-chief Narelle Hooper said in her moderation of the panel.
“In the post-Hayne world, that makes it uneconomic to offer financial advice with upfront fees. Is ASIC open to allow people with low balances to seek advice?”
Ms Press said averages shouldn’t be conflated with balances, giving an example of an 18-year-old and a 65-year-old and saying the 18-year-old would have a lower balance but ‘probably’ would not need advice, in contrast to the older member.
“I think we’ve got to be really careful about advice,” Ms Press said.
“When is it important and how is it offered? My view is technology will help as people engage in it.
“Certainly, the landscape for advice is changing. We at ASIC are supportive of having a strong advice system but it needs to be fair.”
Ms Chester added that two-thirds of super members aren’t making the choice about super until they get to closer to retirement.
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