The government should consider a more streamlined approach to regulatory change – as well as deregulation – to bring down industry costs, says Tria Investment Partners.
In its latest Trialogue article, superannuation consulting firm Tria Investment Partners said it estimates that several regulatory initiatives will cost the industry $2.93 billion to implement.
The research was conducted by Tria for the Financial Services Council (FSC) and unveiled at the FSC Leaders Summit in Melbourne last week.
The costs will ultimately be borne by customers, said Tria, with each and every superannuation fund member already having paid $105 for regulatory changes over the past five years.
In an effort to reduce those costs, the government should look at new ways to implement change, said Tria.
“It would be beneficial if we could work with government and the regulators on creating a more streamlined approach to regulatory change – and in some areas, even consider deregulation,” the article said.
“That would provide an opportunity for the industry to innovate and reduce costs to members. And that can make a big difference to member outcomes.”
According to Tria's research for the FSC, the Life Insurance Framework reforms are expected to cost advisers $31 million and insurers $71 million.
Meanwhile, the adviser education reforms will cost advisers $131 million.
“On top of these implementation costs, there are also ongoing costs of compliance,” the article stated.
“The industry will incur a higher annual operating budget of $262 million per annum to satisfy ongoing compliance with these regulatory changes.”
While these changes are costly, some are necessary to improve the industry, according to Tria.
“Of course, many of these changes were necessary to continually improve practices in the financial services industry, and reflect the importance of managing Australians’ wealth,” the article stated.
“Looking forward, there’s little respite in sight – given the ongoing uncertainty of the last budget’s proposed changes to superannuation rules (not to mention the devil in the detail with any proposal), they are not even included in these calculations.
“That means one thing for certain: regulatory change will continue well into the future.”
Oliver Hesketh, a partner with Tria Investment Partners, will speak about the challenges facing the superannuation industry at the 2016 Wraps, Platforms and Masterfunds Conference in the Hunter Valley on 14-16 September.