3 September 2019

Address to the Financial Services Institute of Australasia Summit, ‘The age of the customer’

Note

Melbourne

Introduction

Good afternoon, everyone. It's fantastic to join you here in Melbourne.

I welcome today's focus on technology and what the future holds for financial professionals in the 'age of the customer'.1

Of course, from the Morrison Government's perspective, it's a clear demonstration that our focus on delivering better consumer outcomes in implementing the Royal Commission recommendations is the right one.

This customer-first focus is also the driving force behind the introduction of and economy wide Consumer Data Right - the first of its kind in the world.

Open Banking, which will be the first offspring from the CDR is all about empowering consumers and providing them choice and competition in the financial system.  A key part of Open Banking is the emergence and mainstreaming of the Fin Tech sector.  In the past few years, in anticipation of this transformation, the government have made practical regulatory changes to pave the way for the entrance of disrupters and innovators, and make Australia's FinTech sector competitive, which will ultimately benefit consumers.

It's a very exciting time to be working in financial services - an area about which I have both personal passion and professional experience.  And today, in my role as Assistant Minister for Superannuation, Financial Services and Financial Technology, I'm pleased to update you on developments in each of these significant areas.

Financial capability

First, I want to start with the pivotal issue of financial capability.

We know that Australians are finding it stressful to deal with money - one in three Australians find dealing with money overwhelming.2

So, any discussion about the power of consumers should start with financial capability.

When Australians understand principles such as budgeting, taxation, and the benefits of saving, they can plan ahead and make informed decisions.

You don't need to be an expert, but you need to know what to ask and where to look for answers.

In other words, knowledge is power.

There are already several initiatives whose goals are to give consumers the skills they need to navigate their financial lives.

ASIC leads the Government's work in this area, which includes:

  • developing the National Financial Capability Strategy;
  • delivering the MoneySmart website;
  • supporting financial education in the classroom through the MoneySmart teaching program;
  • improving access to financial services for Indigenous consumers through the Indigenous Outreach program; and
  • coordinating efforts across Government, the private sector and not-for-profits.

There's also ecstra - an independent not-for-profit launched in March 2019 to champion financial capability.

Importantly, ecstra has a focus on enhancing women's financial capability and the Government has provided $10 million to support this.

There is good work that has been done in this space, but I think you'd agree that there is more that we can do.  The value in enabling ordinary Australians - young and old, high income and low income -to better engage and understand their financial wellbeing is immeasurable.  I know that the Treasurer and the Prime Minister feel the same way.  In this term of government I urge you to watch this space.

Financial advice

Even with efforts to lift financial capability, there will always be a market for financial advice.

We know there is great value in quality financial advice.

A recent report from ASIC found a majority consumers who sought financial advice did so because they felt advisers could recommend products they could not find on their own. 

And given the important role these advisers play in our financial sector, it is critical the industry is held to high standards and that any misconduct is eliminated.

We share Commissioner Hayne's objectives of moving the financial advice industry to the standard of a true profession.

The Government is committed to ensuring Australia has a vibrant and well-respected financial advice industry. One that customers feel confident that the advice they get is the best advice for them.

As such, the Morrison Government has increased the requirements for entities to investigate the full extent of financial adviser misconduct, introduced legislation to end grandfathering of conflicted remuneration and is establishing a new approach for disciplining financial advisers for misconduct through a central body.

And there are changes underway in that sector to lift the bar on education, training and ethical standards.

These include requirements to:

  • meet approved educational qualifications;
  • complete a FASEA-approved exam; and
  • comply with a Code of Ethics.

These changes are significant.  Its important to recognise that, while making these changes to raise education standards in the industry, we need to balance the impact of these reforms against maintaining the ongoing availability and affordability of advice.

As I said, there is great value in quality advice.

That is why I recently announced that we intend to legislated to defer the dates of the both the requirement to hold educational qualifications, and complete the FASEA-approved exam.

Existing advisers will now have until 1 January 2026 - two additional years - to meet the qualification requirements, and one additional year - until 1 January 2022 - to complete the exam.

The extension of the exam will ensure that all advisers, including rural and regional advisers, will have two years to sit the exam, as originally intended. 

The extension of the qualification requirements recognises that many advisers need to balance work, study and family commitments.

For instance, many women, like I did, juggle study with periods of maternity leave.  It's important we recognise this and provide sufficient time to meet the requirements, maintaining a diverse adviser industry - with a good mix of women and men, part-time and full-time.

However, the extra time we have provided to comply with the FASEA requirements is not a reason to procrastinate - we want advisors to get on with it and enrol to sit the exam at their earliest opportunity.

By working together we can build a renewed confidence in the financial advice industry.

Ultimately, reforms to strengthen the sector will benefit all Australians, as they will be able to access better quality advice that is affordable and helps them make good financial decisions.

Royal Commission

Of course, while many of these changes were already underway before Justice Hayne handed down his recommendations, they are consistent with his report.  The findings of Royal Commission into misconduct in the Financial Services, Superannuation and Insurance Sectors - and the confronting - sometimes harrowing - stories of unethical behaviour inflicted upon unsuspecting and ordinary Australians has given a new sense of urgency and the weight of public expectation to reforms.

As such, the importance and volume of these reforms means it is critical that we have clear plan for delivering this comprehensive package of changes. Our recently released Royal Commission Implementation Roadmap does just that. 

Combined with reforms already underway, it is a reform package that represents the largest and most comprehensive corporate and financial services reform process since the 90s.

Over the next 18 months, these reforms will dominate Treasury's legislative program, with the work required equivalent to almost three-quarters of its current program.  And that's on top of all the work that's normally done for the Budget.

It's worth noting that Treasury's legislative program is consistently the largest across Government.

The Morrison Government is up to the task.

We have a proud history of reforming the financial system and we will take Commissioner Hayne's advice in making the changes 'carefully and simply'.

Our Roadmap sets out a timeline for implementing each of the Government's commitments and in doing so, provides clarity and certainty to consumers, industry and regulators.

This certainty is crucial, because as the Treasurer said, we expect industry to align with the urgency and the priority we are giving to this process.

The end of result of this reform process will be a financial services sector that is more trusted, more transparent and more competitive.

Consumer Data Right

Competition is important not only to provide choice but to decrease costs in an industry that touches almost everyone.  As such I want to come back to the Consumer Data Right - an exciting initiative by the Morrison Government and a vital step towards a more transparent and competitive financial sector.

Australia will lead the world in giving consumers greater control of their data - paving the way for more choice, tailored products and lower prices.

Starting with Open Banking and eventually applying to energy and telco services, the Consumer Data Right will make it easier for consumers to move into the best deals for them.

And it won't to stop there.  The Prime Minister has already indicated that extending the CDR to insurance would have great potential value to consumers, and the Productivity Commission has recommended that superannuation would also be a sector ripe for an injection of consumer empowerment.

FinTech

Certainly Open Banking will be the one of the most transformative and world leading initiatives the financial services sector has ever seen.

The uptake of FinTech is a good news story for consumers and the Australian economy.

As Australia's first minister for FinTech, I am committed to supporting an Australian FinTech sector that helps consumers be more engaged with the financial products and services they use; that enhances financial literacy and capability; and that helps us all spend less time and less money managing our own affairs.

There has never been a greater supporter of Australian FinTech than the Coalition and particularly this Prime Minister.

The Morrison Government is building on a strong record when it comes to building the FinTech ecosystem. But we are just getting started.

In the year ahead, I will ensure our policy settings best support the technologies that improve the financial well-being of all Australians.

I will be the FinTech sector's advocate in the ministry - working with my colleagues to ensure access to capital and skills for the businesses driving this change.

Our regulatory settings for FinTech serve a dual function - promoting innovation and protecting Australian consumers.

The Government is committed to reintroducing legislation for a Comprehensive Credit Reporting regime, giving lenders access to data to make a more accurate assessment of a borrower's true credit position.

And we're working to deliver an enhanced regulatory sandbox - which will allow more businesses to test a wider range of new financial products for 24 months, prior to seeking a licence from ASIC.

This fledgling sector in Australia is growing fast.  We want to see it take flight. 

Closing remarks

It's a dynamic time and I welcome the opportunity to provide the Government's perspective.

Change is always unsettling, but it's also exciting and it brings great opportunity.

Financial services is the largest sector in Australia - it contributed $163 billion to the Australian economy in 2017-18 and employs around 440,000 people.

These 440,000 people include the CEO of NAB, the bank teller in a regional branch, and everyone in between. It includes the sole trader financial planner in Wodonga, and the coder working in a fintech startup in the heart of Melbourne.

The financial services sector delivers essential services to every corner of the country and touches the lives of every Australian in some way.

The reforms I've mentioned today are not just change for change sake. They will make our financial system more efficient, more competitive and more trusted - for the benefit of all Australians.

The financial services sector has long been at the forefront of Australia's growth story - and we all want it to keep there.

These reforms are part of the Morrison Government's economic plan to improve consumer trust in the financial system, to build a stronger economy and a secure a better future for all Australians.

Thank you.


1 - https://campaign.finsia.com/FINSIA-SUMMIT-2019-AGENDA

2 - https://financialcapability.gov.au/files/afab-tracker_wave-6-key-findings.pdf