As the financial services industry prepares itself for another inquiry into superannuation, some important lessons can be learned from recent history.
So there is to be another examination of the Australian superannuation industry — this time sanctioned by all the industry parties, from the Financial Planning Association (FPA) through to the Association of Superannuation Funds of Australia and the Industry Super Network.
The Australian superannuation fund industry is clearly far from perfect, but one has to wonder how much can be achieved by yet another inquiry, irrespective of whether it has the backing of all facets of the industry.
What is more, while organisations such as the FPA and the Industry Super Network may have added their backing to the inquiry, it seems highly unlikely that financial planners and the industry funds will find much common ground, particularly where the question of commissions-based advice is concerned.
There is also the likelihood that whatever recommendations flow from the inquiry will be compromised unless the Rudd Labor Government can achieve a majority in the Senate at the next Federal Election.
So before anyone becomes too excited about the inquiry, it needs to be understood that its timing is likely to be such that any resulting legislation will be introduced during the life of a new Parliament, and possibly (albeit a remote prospect) a new Federal Government.
Putting aside the timeframes, the Minister for Superannuation and Corporate Law, Senator Nick Sherry, is to be congratulated for having achieved an initial consensus amongst the major players.
More challenging for the minister will be the task of navigating the fixed-piece positions of those players.
According to Sherry, at the core of the inquiry will be an examination of the structure, operation and efficiency of the superannuation system and, in the absence of detailed terms of reference, that would suggest that the inquiry will traverse everything from the existing regulatory structure through to fees and asset allocations.
It must have been clear to all the industry players that failure to climb aboard Senator Sherry’s inquiry bandwagon would have carried with it the risk of being ignored and marginalised in a process that might ultimately prove fundamental to a significant rewriting of the legislative and regulatory underpinnings of the super system.
It is to be hoped, therefore, that when the minister ultimately makes public the terms of reference of the inquiry, it is not unduly limited in its reach and that as well as examining the operation and structure of the industry, it examines the roles and costs structures of the regulators and the laws they administer.
Indeed, while the inquiry has been founded on a re-examination of the workings of the superannuation industry, it might equally serve a useful purpose by re-examining elements of the Financial Services Reform Act and the effectiveness and costliness of the existing regulatory regime.
While the global financial crisis and the collapse of major players has prompted many calls for more legislation and more extensive regulation, the Government and the industry parties would probably be better served examining the shortcomings of the existing regulatory regime.
While many people have been prepared to point the finger of blame at the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority for their perceived failures to act, it has often been a question of them having nothing to act on.
History shows that, like much legislation enacted over the past two decades, the Financial Services Reform Act represented a compromise between what the Government of the day wanted and what the minor parties would allow.
The result has been deficiencies that have been made obvious by the extreme circumstances engendered by the global financial crisis.
The objective of those participating in this latest Government inquiry should not only be to deliver a better and more sustainable superannuation system, but to deliver one with more appropriate regulatory underpinnings.
It should go without saying that the process will only be seen as fair and objective if it is quarantined from political ideology.
