OPINION | Managing a plethora of new regulatory requirements has been one of the biggest challenges for the super industry in recent years.
For those of us working in policy and compliance, this has meant endless rounds of consultation involving government, the regulators themselves, and myriad other stakeholders.
Over the last 15 years, I have sat on all sides of this process – as a regulator running policy projects, as an advocate for member-owned credit unions and as a policy manager in the profit-to-member super sector. I have seen regulatory change done really well, but also very poorly.
Recently, the Australian Securities and Investments Commission agreed to review its new fee and cost disclosure rules (RG 97) and extend its facilitative compliance approach. This followed a four-year complex consultation process, which many participants described as tortuous.
So what lessons are to be learnt? In my experience, there are boxes to tick to ensure that any new regulation delivers on its goal.
Cost, complexity, context
The first is that any significant regulatory change must be subjected to a cost-benefit analysis, ideally by an independent body, with the results made public. Regulation costs money that comes out of members’ retirement savings. A clear benefit to consumers must be established before proceeding.
The second box concerns simplicity.
Not only does complexity cost money, it can also create loopholes that can be exploited. Sometimes it is better to decide on broad objectives and prescribe only what is strictly necessary to achieve them.
The third box to tick is consideration of the broader policy and regulatory context. How does the new proposal relate to, or impact on, existing policies or other processes that are about to begin, or are already under way?
There are at least five separate bodies examining insurance in super with the view to establishing new rules. This includes the government, ASIC, the Australian Prudential Regulation Authority, and the Productivity Commission. And the Insurance in Superannuation Industry Working Group, with its web of subcommittees, is working on developing a code of practice.
While there is some dialogue between the various groups, it’s hardly the most efficient process.
Similarly, there are overlaps and inconsistencies among all three regulators (APRA, ASIC and the Australian Taxation Office) that collect or are proposing to collect recurrent data from super funds.
The fourth thing to get right is the consultation process. A good one can achieve efficiencies for government, regulators and industry and – most importantly – better outcomes for consumers.
A transparent, orderly, inclusive process avoids surprises, builds confidence, maximises input and delivers efficiencies for stakeholders battling near-constant consultation fatigue.
Leadership is another key. An interesting development in recent times is the increasing reliance on co-regulation in the super system. This has led to the industry taking responsibility for running increasingly complex consultation processes – where we are no longer just stakeholders.
It’s a hard job that requires the ability to foster inclusivity, understand differing agendas, build consensus, maintain momentum, navigate disagreement and overcome unexpected obstacles to deliver outcomes.
Timeframes are also critical. It takes time for super funds to consider reform proposals. It takes more time for their industry associations to consider and synthesise the views of their members and establish a house view. AIST has more than 50 member funds, located in every state and territory, which all have a right to be heard.
A good consultation process needs a strong feedback loop. Without this, stakeholders understandably feel their submission has disappeared into a black hole, and they have no idea why the decision-maker didn’t accept their argument.
In 2018, AIST plans to develop a framework for designing effective processes for consulting on proposed changes to the regulation of the super industry. This framework will acknowledge that participants in each consultation process are responsible for ensuring that it is effective – including stakeholders.
The government and industry owe it to our stakeholders, taxpayers and super fund members to ensure we get bang for their buck.
Ailsa Goodwin is head of advocacy at the Australian Institute of Superannuation Trustees.