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Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

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Page 1: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

Harvey RussellHead of Advocacy

Joseph SorbyExecutive Manager

19 November 2014

VIEW TO THE FUTURE:THE FINANCIAL

THE ADVICE EXCHANGE

SYSTEM INQUIRY

Page 2: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

DISCLAIMER

This presentation is given by a representative of Colonial First State Investments Limited AFS Licence 232468, ABN 98 002 348 352 (Colonial First State). Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of interests in FirstChoice Personal Super, FirstChoice Wholesale Personal Super, FirstChoice Pension, FirstChoice Wholesale Pension and FirstChoice Employer Super from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and interests in the Rollover & Superannuation Fund and the Personal Pension Plan from the Colonial First State Rollover & Superannuation Fund ABN 88 854 638 840 and interests in the Colonial First State Pooled Superannuation Trust ABN 51 982 884 624.

The presenter does not receive specific payments or commissions for any advice given in this presentation. The presenter, other employees and directors of Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for investments in its products. For further detail please read our Financial Services Guide (FSG) available at colonialfirststate.com.au or by contacting our Investor Service Centre on 13 13 36.

All products are issued by Colonial First State Investments Limited. Product Disclosure Statements (PDSs) describing the products are available from Colonial First State. The relevant PDS should be considered before making a decision about any product. Stocks referred to in this presentation are not a recommendation of any securities.

The information is taken from sources which are believed to be accurate but Colonial First State accepts no liability of any kind to any person who relies on the information contained in the presentation.  

This presentation is for adviser training purposes only and must not be made available to any client.

This presentation cannot be used or copied in whole or part without our express written consent.

© Colonial First State Investments Limited 2014.

Page 3: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

THE NEWNORMAL

Page 4: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

THE LANDSCAPEPOLICY AND REGULATORY CHANGE IS NORMAL

2014 2015 2016

Sept 2014FOFA Senate

Inquiry: Report due

Sept 2014PJC advice standards:

Submissions due

Nov 2014FSI: Final Report

Dec 2014Scrutiny of advice

Senate Inquiry: Submission due

Late 2014 Tax White Paper

Terms of reference released

Early 2015FSI: Govt response

July 2015Scrutiny of advice

Senate Inquiry:Report due

Late 2015 Tax White PaperReport Likely

2015-16FSI: Introduce

legislation

2016Federal Election likely to be held

Advice Parliamentary Inquiry

Sept 2014Income stream consultation:

Submissions due

Late 2014 Welfare Review:

Report due

Early 2015Stronger Super:

Reforms finalised

Late 2014 Stronger Super:

Consultation commence

Mid 2015Stronger Super:

Reforms commenced

Financial System Inquiry

Stronger Super

Tax White Paper

Retirement Policy

Other

Oct 2014Govt response to Senate Inquiry

into ASIC

Page 5: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

INDUSTRYUNDER PRESSURE

Page 6: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

FINANCIAL ADVICECONTINUED SCRUTINY & REFORM

Reform!

Streamlining FOFA legislation • Remove opt-in, best-interests catch-all &

retrospective FDS• Palmer United Party disclosure changes

Performance of ASIC• Public register of all financial advisers• Office of the Whistle-blower • No CBA Royal Commission

Professional, ethical and education standards• Increased education standards, including

possibility of Independent Board

Scrutiny of financial advice• Broad scope, including consumer protection,

conduct and Regulator powers

Parliamentary Inquiry

Page 7: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

WHYFSI?

Page 8: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

WHY DO WENEED ANOTHER FSI?

Capital allocation and economic implications

Super became a key focus

It’s been almost 20 years since Wallis

Page 9: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

SUPERANNUATION FOCUS

Superannuation assets are now over $1.8 trillion* - around six times their level since the last

Financial System Inquiry in 1997

Can superannuation be a greater source of funding for

the economy, including banks?

1997

x6

*As at the end of the June 2014 quarter. Australian Government - Australian Prudential Regulation Authority (2014) Statistics: Quarterly Superannuation Performance (June 2014 interim edition issued on 21 August 2014).

Page 10: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

FSI TIMELINE

Aug2014

Nov2014

Jul2014

Mar 2014

Dec 2013

Initial submissions to the Inquiry

1

Second round submissions to the Inquiry

2

Interim report Final report from the FSI Committee due to Treasurer

Financial System Inquiry terms of

reference announced

Page 11: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

FSIWEALTH IMPLICATIONS

Page 12: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

POST-RETIREMENT KEY OBSERVATIONSAND IMPLICATIONS

Interim Report

Page 13: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

POST-RETIREMENT

Implications!

Regulatory incentives to encourage the development and take up of income streams

Greater variety and demand for income stream products

Defaulting into income streams – MyPension?Depending on income stream proposed, may impact level of voluntary contributions to super. Practical difficulties with defaulting.

Compulsory income streams May reduce demand for advice in pre and post-retirement

Government-issued retirement income product May crowd out the private sector and associated innovation

Restrict / tax lump sum withdrawals above a certain threshold

Issue likely to be deferred however lump sum taxes may impact voluntary contributions and trust

Observations or policy options

Page 14: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

CONSUMER OUTCOMESKEY OBSERVATIONSAND IMPLICATIONS

Interim Report

Page 15: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

CONSUMER OUTCOMES

Implications!

Raise minimum education and competency standards Move towards a profession and greater integrity

Enhanced public register of financial advisersGreater consumer visibility and the chance for advisers to differentiate based on their credentials

Renaming general advice as product or sales information Greater consumer clarity

Clearer distinction between aligned and independent advisers

Greater consumer understanding. Advantages for both models.

Enhancing consumer access to effective, low-cost advice

Facilitate greater use of technology in delivery of advice and disclosure

Enhance ASIC’s powers Greater intervention powers

Observations or policy options

Page 16: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

SUPERANNUATION SYSTEM:

KEY OBSERVATIONSAND IMPLICATIONS

EFFICIENCY AND POLICY SETTINGS

Interim Report

Page 17: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

SUPERANNUATION SYSTEM: EFFICIENCY AND POLICY SETTINGS

Observations or policy options

Implications!

Super fees are too high when compared internationally

FOFA and Stronger Super and increased fund consolidation will continue to place downward pressure on fees. Auction system for fund selection?

Ban on direct leverage in super and concerns around SMSF operating cost levels

Some members may reconsider direct property. Need for greater trustee education or financial advice.

Is vertical integration reducing competitive pressures and increasing super fees? Are the benefits flowing through to consumers?

Possibility of greater distinction between independent and aligned advisers

Is there an undue short term focus in superannuation and a move to passive investment management?

Move to more homogenous product design, restrictions on asset transfers (extend portability timeframes)?

Statutory compensation scheme Increase moral hazard and impact PI insurance.

Page 18: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

REGULATOR’S FUNCTIONS &

KEY OBSERVATIONSAND IMPLICATIONS

CONSUMER PROTECTIONS

Interim Report

Page 19: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

REGULATOR’S FUNCTIONS ANDCONSUMER PROTECTIONS

Observations or policy options

Implications!

Industry-funding model for ASIC May result in higher levies, particularly for ‘higher risk’ entities and individuals

Subject product issuers to a range of product design (suitability) requirements

May reduce product innovation given limitation on features and design

Refine the scope of ASIC’s mandate and increase coordination via CoFR

Greater transparency on Regulator activities and decision making

Remove disclosure requirements that have proven ineffective and facilitate new ways of providing information to consumers

Increase consumer engagement and literacy

Accelerate competition between product providers

Page 20: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

WHAT’SNEXT?

Page 21: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

CONCLUSION

Regulatory change is now business as usual

FSI will have a considerable focus on wealth management given the growth of

superannuation

IFAs are well positioned

Page 22: Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

THANK YOU