OPINION PIECE - by Sally Loane, Chief Executive Officer
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The swift response from regulators to many of our requests for relief and waiver from a raft of regulatory initiatives and projects as the Black Swan event of the century closed our economy to a trickle was enormously welcome.
Financial services firms, which overnight had to divert teams away from data collection projects and writing reports on minor disclosure statement defects to manage the flood of customer inquiries and the welfare of their own staff as the Government introduced emergency policy, were relieved. Tens of thousands of their staff transitioned from working in office towers to their spare rooms and dining room tables, again, almost overnight. Fresh regulatory and compliance tasks, layered on top of financial services businesses year after year, were deferred for the time being. Draft Royal Commission laws were set aside as Treasury teams were diverted onto critical operations to triage the economy.
More relief was provided by the NSW government which quickly passed new laws to facilitate the witnessing of signatures via audio visual link. Some financial advice rules have been streamlined, allowing worried consumers immediate access to simple advice. While perhaps not the “wave of deregulation” being seen across the whole economy, as noted by RMIT’s Chris Berg recently in the AFR, nonetheless, a temporary breather for financial services is better than none.
We’ve all watched, fascinated, as the massive COVID-19 disruption has acted like a time-lapse camera – rapidly speeding up technology reforms like online purchasing, telemedicine and virtual learning and working. When this is over, we may never return to city peak hour travel, mass occupation of CBD office buildings and getting on planes for meetings we can now Zoom or Skype into.
And what happens to the moth-balled regulations? The red tape removed and lying on the shelf? Like a tree that falls in the forest, and no-one is there to hear it, does it make a sound? It’s a wry joke in financial service firms that the fastest-growing cost centre is the risk and compliance division. Before, during, and after the Royal Commission firms hired dozens of experts to manage the significant increase in regulatory and legislative compliance. In turn, regulators beefed-up with millions in extra funding, were also hiring.
So, will everything go back to “normal” when the pandemic is under control and the economy comes back to life? The Government, won’t want to shelve reforms designed to assist consumers and enhance transparency, but it might mean that some of the ancient ideological blockages to reform in some areas of financial services, like resistance to defaulting once for superannuation, will be swept aside. It might also mean that some poorly designed Royal Commission recommendations, such as the ban on advice fees in MySuper, will be reconsidered. Consumers will certainly be better off if state governments ditch the highly regressive stamp duty on life insurance.
It’s hard to see how the Government’s proposed Financial Accountability Regime, which goes way beyond the Royal Commission’s recommendation for an executive accountability structure, adds value for consumers. It will certainly add layers of complexity into businesses, which translates to added costs, passed through to the price of goods and services. Our managed funds industry is hamstrung by a combination of high taxes and cumbersome regulatory settings according to a new Morningstar study which has rated Australia as one of the least investor-friendly markets in the world.
Successive Federal Governments over decades have promised to cut back regulation, but instead we’ve witnessed the exponential growth of regulatory regimes and matching growth of agencies to oversee them. Those of us who care about getting better value, less costly and more easily understood financial products and services into the hands of consumers are hoping for a regulatory bonfire, even a small one, as we make our way back to post-COVID-19 recovery. That will mean that at least part of this dreadful crisis will not be wasted.
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