Keynote address - Financial Services Council Summit 2019


A keynote address by ASIC Chair, James Shipton at the Financial Services Council Summit 'Shape your industry', Sydney, Wednesday 28 August 2019 


Good morning.

Today I will outline ASIC’s strategic priorities for the year ahead and then speak about some of our important work in the wealth management and insurance sectors.

1. ASIC’s principal strategic priorities and release of our Corporate Plan

This morning, we will release our Corporate Plan for 2019 to 2023.

The Plan outlines how we aim to achieve our vision for a fair, strong and efficient financial system for all Australians - through our internal change program and our key strategic priorities.

The strategic priorities we have identified represent the most significant ways in which we are addressing consumer harm, punishing wrongdoing, and encouraging better culture and behaviour – including a greater emphasis on fairness and professionalism – throughout the industry.

One thing that is different this year about our Corporate Plan is that we have highlighted the range of regulatory actions we propose to deploy in relation to each of our strategic priorities.

This is because we recognise that we need to utilise the full suite of our regulatory tools to achieve our goals. 

To this end, where we identify problems, we will make the most of our enhanced regulatory toolkit by selecting the tool, or tools, most appropriate to address the problem.

We also have to recognise the limitations of certain tools. One example is the need to shift away from an over-reliance on disclosure to protect consumers. Instead, we will look to use targeted powers like the product intervention power more often.

We will say more about the inherent limitations of disclosure when we publish a joint report with the Dutch AFM on the subject soon.

Our strategic priorities for the year ahead are:

  1. High deterrence enforcement action,
  2. Prioritising the recommendations and referrals from the Royal Commission,
  3. Delivering as a conduct regulator for superannuation,
  4. Addressing harms in insurance,
  5. Improving governance and accountability,
  6. Protecting vulnerable consumers, and
  7. Addressing poor financial advice outcomes

Turning to each of these priorities:

First - High deterrence enforcement action

ASIC is focused on effective enforcement action, particularly cases that have a high deterrence value and those responding to egregious misconduct (for example, misconduct impacting vulnerable consumers).

We are already enhancing our enforcement focus. From February 2018 - when I joined - to June of this year:

  • there has been a 21% increase in the number of ASIC enforcement investigations, 
  • a 74% increase in enforcement investigations involving the big six (or their officers or subsdiaries), and
  • a 166% increase in wealth management investigations.

We are very clear eyed about taking matters to court.

  • We will both succeed, and we will fail there.
  • Nevertheless, the ultimate interpretation of the courts as to the suitability of our actions is a fundamental part of our system of government.

Secondly - Prioritising the recommendations and referrals from the Royal Commission

An important strand of work is directed at meeting the outcomes of the Royal Commission.

We are prioritising this work and working with Parliament, the Government, APRA and other regulators to get the job done.

Thirdly - Delivering as a conduct regulator for superannuation

In establishing ASIC as the primary regulator of conduct in superannuation, consistent with the Government’s response to the Royal Commission, we will look to improve outcomes in superannuation through:

  • taking decisive regulatory and enforcement action to deter misconduct, and
  • the supervision and surveillance of superannuation trustees - with a focus on whether trustees act in the best interest of members and treat them fairly.

Fourth - Addressing harms in insurance

We will take enforcement and other regulatory action against mis-selling of insurance products, particularly to vulnerable consumers, and review concerning product features and practices.

We will also support and implement insurance law reforms that will enhance our ability to act in relation to poor conduct and poor consumer outcomes in insurance (especially coverage of claims handling). As these legislative reforms are implemented, we will look to take action on teh consequences of unfair contract terms and concerns in claims handling.

Fifth - Improving governance and accountability

We are conducting enhanced and intensive supervision of key firms, including via our Close and Continuous Monitoring (CCM) program and our Corporate Governance Taskforce.

These supervisory approaches are aimed at identifying cultural, organisational and management failings that may lead to conduct problems, breaches of the law and unfair outcomes.

The goal here is to help identify deficiencies before they become breaches of the law.

Also, we are committed to supporting and implementing the proposed conduct accountability regime.  

Sixth - Protecting vulnerable consumers

Considering the impact of harm to consumers, particularly those who are vulnerable, is central to how we prioritise our work.

We are committed to taking regulatory action against the unfair treatment of vulnerable consumers by financial services providers.

Our new product intervention power and the design and distribution obligations will be vital to the protection of vulnerable consumers – by ensuring that financial products which are designed for and sold to them meet their particular needs and achieve fair outcomes.

  • As you would have seen, our two initial proposed applications of the intervention power have focused on vulnerable consumers.
  • The design and distribution obligations regime will commence in April 2021. We are currently developing guidance on our expectations for the new regime. Nevertheless, we encourage firms to start planning for these significant reforms now.

Seventh - Addressing poor financial advice outcomes

We will support measures to improve the professionalism of financial advisers and target the potential misconduct and harms to consumers that may arise from the industry’s shift towards ‘general advice’ models.

We are also closely monitoring the potential harms that may result from larger institutions’ departing from the advice sector.

2.  ASIC’s work in the wealth management sector

Turning now to the work that ASIC is doing in the wealth management area.

The superannuation, investment management, life insurance and financial advice sectors are critical parts of Australia’s financial system and have significant impact on the well-being of Australians.

They are definitely dealing with other people’s money.

Our focus is on outcomes for consumers and we will target areas of poor consumer outcomes.

Industry should too. Since they are custodians of other people’s money they need to act in those people’s 'best interests'.


Nearly 16 million Australians are currently saving for their retirement through superannuation.

ASIC is determined to improve the effectiveness of our superannuation system to ensure better financial outcomes for Australians relying on this system for their retirement.

Our regulatory remit in superannuation is broad, covering topics such as:

  • insurance,
  • advice,
  • promotional activities,
  • disclosure and conduct obligations linked to a financial services licence, and, importantly,
  • complaints handling.

Actioning superannuation trustee misconduct

ASIC is committed to taking action against trustee misconduct that is causing significant harm to members specifically or the financial system more broadly.

ASIC will look particularly at trustee behaviour that causes monetary loss to members, financial exclusion, loss of market integrity and confidence, and behaviour that undermines competition.

ASIC is also putting trustees on notice where there is persistent underperformance. 

  • Consumers expect super trustees to act in their best interests to improve retirement incomes - consistent underperformers are clearly not doing enough. 
  • While underperformance is not illegal, it is frequently caused by conduct that does breach the law e.g. conflicts of interest, failure to act in members’ best interests, or lack of diligence by trustees.
  • ASIC will consider persistent underperformance as a key indicator and red flag to help target our work to identify misconduct. 

Insurance in superannuation

Millions of Australians hold insurance via superannuation.

Balance erosion arising from inappropriate or poor value insurance is a significant issue for many.

Some reduction in balance erosion issues has occurred as a result of Protecting Your Super Package Reforms. But there is more to be done.

We will address this harm by expecting new norms of behavior by trustees in relation to communication, design and claims processes for insurance in superannuation.

Advice and superannuation 

The erosion of superannuation balances as a result of members paying inappropriate or excessive advice fees from superannuation accounts is another important area of focus for us.

As ASIC and APRA communicated to trustees earlier this year, all trustees should have in place strong governance, risk management and oversight processes to ensure that only authorised and appropriate fees are deducted from super accounts.

We expect trustees to have reviewed their governance and assurance arrangements for fees charged to super accounts.

Another project that ASIC is working on looks at market structure and conflicts issues in relation to advice by superannuation funds. We are looking at 25 superannuation funds across the retail, corporate, public and industry sectors, including testing a sample of advice to see the quality of advice provided.

Other superannuation work

Our other work in superannuation includes:

  • Finalising the fees and costs disclosure guidance (Regulatory Guidance 97) following our recent consultation process. This critical piece of work is also relevant to the funds management sector.
  • Also, we see opportunities for improvement in relation to the way trustees handle member complaints.

Investment management

Turning to the investment management sector:

ASIC’s work in this sector for the coming year will include a focus on addressing the potential of:

  • financial loss caused by underperforming funds due to conflicts of interest, poor governance and/or lack of competition; and
  • financial hardship and loss for consumers caused by illiquid or failing funds across the economic cycle.  

 To that end, we will be undertaking work in the following four areas:

  • competition in the funds management industry;
  • fund manager resilience;
  • the best interests duty of responsible entities; and
  • fees and costs disclosure.

Competition in the funds management industry

We believe the fundamental purpose of competition in markets for financial products and services is to enhance the long-term interests of end users of the financial system.

Therefore, in the coming year, we will be assessing the level and effectiveness of competition in the Australian funds management industry.

Fund managers manage other people’s money. They provide a range of products that offer investors exposure to various asset classes, and consumers pay for this through the fund’s fees and expenses.

Robust competition can help ensure that consumers are obtaining good value for money by the professional management of their investment and a healthy return.

Fund manager resilience

As investment products are not prudentially regulated nor government guaranteed, its important to ensure consumers, industry and ASIC are as prepared as possible for the liquidity issues and product collapses that may result from inevitable market cycles.

 So, we will focus on resilience in the funds management industry.

 To this end, we will:

  • work towards enhancing consumer understanding; and
  • review the definition of liquid assets (in the context of the Corporations Act rule about whether a scheme is liquid and can therefore pay redemptions). 
    • We believe it is currently too broad and currently allows inherently illiquid schemes to call themselves liquid. We will be consulting this year on a narrower definition, which we believe better aligns with general notions of when an investment is liquid.

Best interests duty of responsible entities

A responsible entity must act in the best interests of investors when making decisions on matters such as investment structures, business models and service providers.

In line with our priority of improving governance and accountability, we will be looking at how some responsible entities are, as a practical matter, meeting this important duty.

This will involve looking at behaviours and actions that could indicate whether a responsible entity is failing to act in the best interests of investors.

Among other things, we will be looking at the responsible entity’s use of service providers.

Financial advice

Before I touch on insurance, I want to mention our work in the financial advice space.

Ending grandfathered remuneration project

We have recently commenced a review into industry moves to voluntarily end grandfathered conflicted remuneration by December 2020, and the extent to which benefits of this are being passed on to affected clients before that date.

Legislation to ban the grandfathering arrangements was introduced earlier this month.

We are undertaking quantitative and qualitative reviews to monitor the industry’s approach to ending the grandfathered arrangements.

We expect to deliver our final report from this project to the Treasurer by June 2021 and we also plan to publicly release interim findings next year. 

Other financial advice work

Our other work in the financial advice space includes:

  • Supporting measures to improve the professionalism of financial advisers and target potential misconduct and harms to consumers that may arise from the industry’s shift from ‘personal’ to ‘general advice’ models.
  • Also, next year we will assess the quality of life insurance advice. The findings of this review will be finalised and published by ASIC in 2022.
  • And, in 2020-21, we will commission further research (following Report 627 What consumers think about financial advice – released earlier this week) to explore whether consumers have unmet financial advice needs. This project will examine:
    • the state of the financial advice industry;
    • the demand for and supply of financial advice; and
    • what measures may be required, if any, to reduce any gaps between supply and demand.

3.  ASIC’s work in insurance

Our fourth strategic priority is to address harms in insurance.

Proposal to ban unsolicited telephone sales of direct life insurance and consumer credit insurance

In 2018, we identified some significant concerns in relation to the sale of direct life insurance.

As I said then, substantial cancellation rates and poor claim outcomes showed that people were being sold products they didn’t want, couldn’t afford, or that didn’t perform as they expected.

In July this year we issued Report 622 which identified problems with the design and sale of consumer credit insurance, or CCI.

We recently outlined our proposal to ban unsolicited telephone sales of direct life insurance and CCI. Submissions on this proposed modification close tomorrow.

In order to help rebuild consumer trust, we expect the insurance industry to support higher standards that improve consumer outcomes, and for industry to constructively engage in this consultation process.

Total and Permanent Disability Insurance Review

We will shortly publish a report outlining the findings of our industry review of Total & Permanent Disability (TPD) Insurance claims handling.

As most of you will know, TPD insurance is widely held – over 13 million Australians have TPD cover and almost 90% are insured through their super fund. It plays a crucial role as a safety net in supporting the financial security of Australians.

We have identified four important industry-wide problems that life insurers and superannuation trustees must fix.

 These are:

  • Restrictive TPD definitions that result in poor consumer outcomes
  • Frictions in claims handling processes which are likely to lead to withdrawn claims
  • Significant deficiencies in insurers’ ability to record and search for claims data, and
  • Higher than expected declined claim rates.

Superannuation trustees play a crucial role in the delivery of life insurance to their members. We expect trustees to act in their members’ best interests by providing access to affordable insurance products that are suitable for their members.

We also expect trustees to play a robust role alongside insurers in ensuring a good claims handling experience for members. This includes the management of any insurance-related complaints. 


In closing, there are high community expectations on ASIC and the entire financial sector right now.

All of us, the regulators and the regulated, must do better and get it right.

Australians deserve a fair, strong and efficient financial system. And it's up to everyone in this room to make it happen.

Thank you.

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