Increasing volumes of regulation and compliance has come at a great cost to the financial services industry and consumers, according to new research released by the Investment and Financial Services Association (IFSA).

The Headland Statement, prepared by the IFSA Regulatory Affairs Board Committee, makes a number of recommendations for the future regulation of the industry including the establishment of a new advisory body to liase with government and industry on proposed changes and regulation before, during and after legislation has been passed. IFSA also recommends drafting legislation should be principles-based rather than rules-based. According to Steve Tucker, ISFA Committee chair and chief of MLC, financial services companies are spending 10-15 per cent of total costs annually to comply with industry regulation. The IFSA Key Industry Statistics Surveys for the past five years have shown a significant increase in the cost to industry in areas of IT, regulatory compliance and customer service. “What we need to ensure with any future regulatory change is that the costs of change are considered in the context of their ability to deliver actual positive benefits to customers,” Tucker said. Richard Gilbert, IFSA chief, said that increased regulation has cost the industry close to $1 billion so far. “If we could shave 20 per cent off that, then that will be beneficial to the investor,” Gilbert said. He rejected the suggestion that any saving would be pocketed by the institutions. “It’s a highly competitive environment and it’s imperative to drive costs down for the consumer. “If costs don’t come down, people will find other ways to invest, and those ways may be less protected with less capital backing,” he said.