In brief: Earlier today representatives of ASIC and APRA provided some insights into their thinking at a session called 'Up close and personal with the regulators' at the annual conference of the Australian Superannuation Funds Association in Melbourne. Senior Regulatory Counsel Michael Mathieson (view CV) reports.


The Australian Securities and Investments Commission was represented by Deputy Chairman Peter Kell and the Australian Prudential Regulation Authority was represented by member Helen Rowell.

I asked Mr Kell a question about financial advice. I noted that, going by the interim report of the Financial System Inquiry (the FSI) and the second round submissions to the FSI, there appeared to be a consensus that the concepts of financial product advice, general advice and personal advice were not working well and that a more calibrated system of classification was needed. I asked Mr Kell about the extent to which ASIC was taking that apparent consensus into account in approaching its enforcement activities in this area.

Mr Kell responded by saying that customers do not understand these distinctions. (So much can be accepted, but the distinctions have important consequences for product issuers and financial advisers.) He also expressed a degree of surprise about the extent to which the FSI interim report focused on these matters. He also acknowledged that the distinction between general advice and personal advice can be very difficult to draw and apply. (So much would be heartily accepted by many, including me.)

Perhaps most importantly, Mr Kell said that ASIC did not want to see people 'gaming' the distinction. By this he referred to issuers distributing products under the rubric of general advice which should really be distributed under the rubric of personal advice. He referred to structured products as the kind of product where this concern might arise. Mr Kell's comments feed straight into the much-discussed product suitability policy options canvassed in the FSI's interim report.

Towards the end of the session, Pauline Vamos of ASFA asked the regulators what specific key messages they would like to get across.

Mr Kell's answers, as I would best distil them, were: when something goes wrong, the associated reputational damage lasts longer in the financial services industry than in most other industries; and, 'transparency is king' – do the right thing and report your breaches.

Ms Rowell's answers, again as I would best distil them, were: the resistance APRA is seeing to improving governance is concerning, it is time to 'get on board' with independent directors (or better still, get them on the board); the annual MySuper scale assessment is not about size, it is about value; and, the industry needs to be more cohesive and its participants should stop attacking each other.