Australian Securities and Investments Commission chair Greg Medcraft has said it is time to crack down on the “oligopoly” in the financial services industry that allows a handful of retail institutions to dominate the advice market.
Competition in advice was a hot topic during a panel titled “Competition in financial services” at the ASIC Annual Forum in Sydney on Monday, March 20, 2017.
“When it comes to advisers that are aligned or integrated as part of one of the big four banks or AMP, you will not see any industry funds on their approved products list,” Sunsuper director Jenni Mack said. “There’s certainly an area of the advice market that still needs addressing.”
Picking up the point, ASIC’s Medcraft said the time to deal with this oligopoly was now, because the selling of the wrong products to consumers has hurt consumer confidence and outcomes.
“You have got to look at what the outcome is, and there is a lot to be done dealing with conflicts of interest,” he said.
He added that if ASIC did get the intervention mandate the 2014 Financial System Inquiry recommended, together with the competition objective – including dealing with remuneration industry-wide – the corporate regulator could start to make some improvements in the advice space.
Australian Prudential Regulation Authority chair Wayne Byres said regulators had the complex balancing act of achieving safety for the community with regulation but not stifling innovation.
“What we’re really after is sustainable competition, and that means financially strong competitors who are going to be able to function in both the good times and bad,” Byres said.
He clarified, however, that the issue of vertical integration was “not black and white”; rather, there were advantages and disadvantages that needed to be worked through.
“I am wary of [giving] a soundbite answer that says if it’s good or it’s bad,” he said. “It comes back to the actual outcome being generated for consumers – do you actually think that’s good or bad?
“Even if we have four large financial services groups, there is no shortage of providers, so part of the challenge is to help consumers understand the choices.”
ASX chief executive Dominic Stevens told delegates at the forum that increasing competition in the financial services sector should not be pursued as an end in itself, but as a way of delivering benefits to the community.
While competitive markets are the most efficient ways to allocate capital goods and services through the economy, this should be done for the higher purpose of facilitating economic growth and other social objectives, Stevens said.
“As such, it’s important to understand competition within the overall goal of what we are trying to achieve – providing the most efficient product or service to end users,” he said.