Good afternoon.
I would like to thank Liz Westover for that introduction, and Lee White and Yasser El-Ansary for inviting me to speak with you today.
I notice that the slogan of your conference is 'Find Solutions'. This is also a key goal for the Government, as we work together with regulators, industry and consumer groups to develop the best responses to consumer protection and financial literacy issues.
Speaking of solutions, I'd like to commend the Institute of Chartered Accountants Australia for developing an SMSF specialisation for your members.
I understand that the program, which began only this year, has been very popular, with about 180 members completing the course, and a further 80 currently enrolled.
The fact the Institute has received over 1,000 expressions of interest from members who want to attain this specialist status indicates that this is a very worthwhile initiative.
Regulation of the superannuation sector
I'd like to outline the Australian system of regulation for super funds, and update you on some current issues affecting self-managed funds.
As you'd be aware, regulation of Australia's superannuation system spans multiple agencies. This arrangment reflects the risks associated with the compulsory and market-linked nature of superannuation.
Following the restructure of financial sector regulation in Australia in 1998, the Australian Prudential Regulation Authority (or APRA) was established as an integrated financial sector regulatory body and bears primary responsibility for the prudential regulation of superannuation in Australia.
The Australian Securities and Investments Commission (or ASIC) is responsible for market integrity and consumer protection across the financial system, including some areas of superannuation such as market conduct, disclosure and complaints systems.
And the Australian Taxation Office is responsible for the regulation of self-managed super funds (or 'SMSFs'), and their compliance with all relevant provisions in the superannuation laws, including trustee covenants, investment rules and administrative obligations.
Because SMSF trustees are in a position to protect their own interests, the ATO takes a compliance, rather than prudential, approach to regulation.
This approach reflects the self-managed nature of these funds, with the ATO providing guidance and assistance to SMSF trustees and their advisers.
In addition to providing education and support, the ATO has an extensive compliance program. A large part of this is based on ensuring lodgement of SMSF annual returns and following up on contraventions that are reported by approved auditors.
In May 2009, the Government commissioned the Super System Review - otherwise known as the Cooper Report - to make recommendations into the governance, efficiency, structure and operation of Australia's superannuation system.
Given the significant role that SMSFs play in Australia's superannuation system, it's important that there is appropriate oversight of SMSF service providers, that fund investments are consistent with the purpose of superannuation, and that any fraudulent activity is curbed.
After extensive consultation, the Government announced a package of reforms designed to improve the SMSF sector. I'd like to take this opportunity to acknowledge ICAA members for their participation and contribution to the Super System Review and to the consultation processes. I would particularly like to thank Graham Meyer, Anna Carrabs and Liz Westover for their contributions.
Stronger Super reforms - auditor registration and ATO powers
Stronger Super represents the Gillard Government's response to the Super System Review. The Stronger Super reforms will make the Australian superannuation system stronger and more efficient, drive competition, and in turn help to maximise retirement income for members.
Specific reforms will strengthen the governance, integrity and regulatory settings of the superannuation system, including those relating to SMSFs.
Approved auditors play a crucial role in regulating the SMSF sector. Auditors of self-managed funds are required to assess the fund's overall compliance with the law and the fund's financial statements. The annual audit provides assurance to the Government and the general public that SMSFs are complying with superannuation laws.
SMSF auditor registration is being introduced to raise the standard of SMSF auditor competency and to ensure there are minimum standards across the entire sector. As well, SMSF auditor registration will ensure that auditors of self-managed funds have knowledge of relevant laws and are able to detect and report contraventions by SMSF trustees.
The registration regime will come into effect from 31 January 2013.
The Super System Review also considered the issue of SMSF trustee education, but did not favour mandating SMSF trustee education across the entire sector.
However, the review did suggest that compulsory education can be an appropriate outcome where non-compliance with the superannuation laws, especially of a lower-level nature, is detected.
In these instances, compulsory education will help to improve trustee competence and engagement with their regulatory obligations.
The review recommended that the ATO be given the power to enforce mandatory education for trustees who have contravened superannuation legislation.
This education would be provided by a body approved by the regulator. No fees can be charged for approved education courses of this type.
The Government is currently developing legislation to implement this recommendation. It's expected that the legislation will be introduced into Parliament in the Spring sittings, and that the provisions will apply to contraventions that occur on or after 1 July 2013.
FOFA reforms - accountants' exemption
As I'm sure you are aware, the Future of Financial Advice (or 'FOFA') reforms became law on 1 July this year. To allow the financial services industry time to transition to the new regime, these reforms will be voluntary until 1 July 2013.
The FOFA reforms will transform Australia's financial advice industry and deliver major benefits to all Australians.
The FOFA reforms will lead to a higher level of professionalism across the financial advice industry. Specifically, they will benefit the SMSF sector by improving the quality of advice that trustees receive, thus helping them to maximise their retirement savings.
On 23 June this year, my colleague Bill Shorten, the Minister for Financial Services and Superannuation, announced a new limited form of Australian financial services licence to replace the accountants' licensing exemption.
Under this new form of licence, accountants will be able to advise their clients, not just on the set-up and structure of self-managed funds, but also on the manner in which the funds are invested.
Up to 10,000 accountants are expected to make use of this new licence.
These changes are positive for both accountants and consumers.
They will make financial advice more accessible to the trustees of self-managed funds, and give accountants an important role in supporting the SMSF sector.
The changes will also create growth opportunities for accountants who wish to diversify their business at the same time as giving Australians greater access to financial advice. And importantly, the changes will ensure that people who receive financial advice from accountants have access to all the regulatory protections in the Corporations Act.
Statutory compensation for SMSFs
I'd now like to quickly update you on the issue of statutory compensation for SMSFs.
The Government has investigated avenues to protect consumers in its response to the report prepared by Richard St. John into compensation arrangements for consumers of financial services.
The Government received submissions from industry and consumer groups on the report which, among other things, recommends against the introduction of a "last resort" compensation scheme at this stage.
The Government will respond to the report soon.
I should also mention that the ATO updated its website on 30 July, reminding SMSF trustees that they do not have the same access to compensation as APRA-regulated superannuation funds in the event of theft or fraud.
I'll turn now to the broader question of the respective roles of Government and consumers in the area of financial literacy.
Financial literacy - roles of Government and consumer
In the fallout from the Global Financial Crisis, governments around the world questioned whether it was enough to rely on general financial literacy and informed disclosure to provide a high level of consumer financial protection.
While this Government has an ongoing commitment to improving the financial literacy of all Australians, we recognise that financial and consumer education can never provide the complete answer.
To ensure that consumers receive an optimal level of consumer protection we need three things.
Firstly, a highly professional financial services industry, in which practitioners are fully informed about their responsibilities and obligations.
Secondly, informed and engaged consumers who know when to seek professional advice.
And thirdly, an appropriate level of regulation of the financial services industry, and for individual financial products.
Of course, achieving the right balance can be complex.
But the Government is working to ensure we do get it right, and that both firms and individuals are equipped to manage risk.
Industry efforts in financial literacy
I can't talk about financial literacy without mentioning some of the many worthwhile industry initiatives designed to help people gain confidence in managing their money.
For example, in June this year, as the Minister responsible for financial literacy, I was delighted to launch the ANZ Bank's MoneyMinded and Saver Plus programs. These initiatives are delivering tangible results to thousands of Australians.
The Government has been supporting the Saver Plus program since 2009. By providing matched savings of up to $500 per person for those individuals who complete the MoneyMinded course, Saver Plus gives financially disadvantaged people that extra bit of encouragement to gain the skills they need to build their financial awareness, knowledge and confidence.
The ANZ Bank has also conducted a series of surveys of adult financial literacy in Australia. I was heartened to learn that the most recent survey, launched late last year, found that more Australians feel they are in control of their finances, with a greater number of households saving on a regular basis in the wake of the GFC.
The Commonwealth Bank is another outstanding corporate citizen in this area. The Commonwealth Bank Foundation runs a suite of financial literacy programs designed to improve the financial literacy of young people and Indigenous Australians.
For example, the Foundation's StartSmart program reaches over 200,000 primary and secondary students across Australia, helping them to develop the confidence and competence to make smart decisions about money from an early age.
I was delighted to recognise the financial and community sectors' efforts in this area at the Australian Bankers' Association financial literacy conference a few weeks ago where I participated in a Q&A session on broadening financial understanding, and the respective roles of financial literacy, consumer education, product disclosure and financial advice.
ASIC financial literacy initiatives
Initiatives like the ones I've just mentioned, plus many more, complement the Government's own financial literacy work.
At a broad level, the Government has commissioned ASIC to be the principal agency responsible for financial literacy. As the industry regulator, ASIC promotes informed participation in the financial system, so it is ideally positioned to take the lead in advancing financial literacy in Australia.
ASIC coordinates a key aspect of the Government's National Financial Literacy Strategy - the MoneySmart website.
MoneySmart covers topics such as budgeting and managing money, borrowing and credit, superannuation and retirement, investing basics and scams.
The MoneySmart Website is a multi-award winning websites that is used by over 120,000 per month.
MoneySmart is a collaborative, multi-agency strategy which uses social media and smartphone apps to promote its content. It has over 1,300 Twitter followers and over 800 Facebook fans, and reaches on average of about 40,000 people via Twitter each month.
And MoneySmart's many videos available on YouTube have been viewed over 41,000 times.
This level of interest demonstrates that Australians have a keen interest in learning more about managing their finances.
As a reflection of this, the inaugural MoneySmart Week was held in the first week of September and will now become an annual event aimed at promoting the importance of financial literacy.
I was thrilled to be involved in several MoneySmart Week events, including the MoneySmart Awards Ceremony, where I had the opportunity to present the awards and meet the recipients. These awards are designed to recognise individuals and organisations that have advanced financial literacy across a range of areas.
Another very important component of ASIC's financial literacy agenda is the work it carries out with schools and teachers - the 'Helping Our Kids Understand Finance' initiative.
In August, ASIC launched the MoneySmart Teaching primary professional learning package. This new resource helps teachers to deliver financial literacy education in schools.
I was pleased to launch the package at a national MoneySmart Teaching conference for primary school teachers last month, and to see that it contains a lot of great resources for engaging students with real-life consumer and financial literacy content.
The program aims to teach 6,000 teachers and, for the very first time, principles of financial literacy will be incorporated into subjects across the national curriculum.
Resources for secondary schools are expected to be released in December.
Conclusion
Ladies and gentlemen, I can assure you this Government is fully committed to further strengthening Australia's financial services industry, and better equipping both firms and individuals to better manage risk in an increasingly complex environment.
The forthcoming changes to self-managed super funds are a key part of that broader agenda.
Once again, thank you for the opportunity to come and speak with you today, and I trust that you find the rest of the conference productive and enjoyable.