Minister for Financial Services Daniel Mulino has publicly acknowledged the Shield and First Guardian collapse has stalled Treasury’s work on advice reform.
Mulino told the ASFA Conference that the Delivering Better Financial Outcomes reforms – which was already beset by drafting challenges – has become more complicated due to the $1.2 billion superannuation collapse.
“I would just flag it’s a set a reforms which, if anything, is now a little bit more nuanced given recent developments,” Mulino said on Wednesday morning to the conference at the Gold Coast.
Professional Planner previously reported that the Shield and First Guardian collapses had worked their way up to the top of the Treasury team’s priorities and pushed down other reforms such as DBFO, but this was the first public admission from the minister of the matter.
The first tranche of reforms passed in the middle of last year, with only some of the draft legislation for the second tranche released before the federal election in May.
Treasury continues to work on changes to the Best Interests Duty and safe harbour steps, along with the controversial introduction of the “new class of adviser”.
But Mulino reiterated the government is committed to delivering advice reform so that those “who can’t afford or where it’s not appropriate for them to have full-fee advice” can receive guidance and advice.
“We are working intently on this issue and we are moving towards exposure draft legislation of the next set of legislation, but it is a complicated set of reforms,” Mulino said.
In August Mulino told the Retirement Leaders Summit, jointly hosted by Professional Planner publisher Conexus Financial and its philanthropically-funded think tank The Conexus Institute, draft legislation would be out this year.
But at the same event heard that the Shield and First Guardian collapses may lead to additional regulatory reform.
The collapse of the two funds has left $1.2 billion of retirement savings of 12,000 people up in the air.
“Shield and First Guardian obviously very prominent at the moment in the public discourse and the media,” Mulino said on Wednesday.
“They’re not the only collapses, they’re not only instances of significant losses, they are the largest, but they do speak to some systemic issues that we all need to work through. I do acknowledge the losses that so many people have gone through.”
Mulino acknowledged the written communication he’s received from victims and has met some in person.
“I’ve read the transcripts of a number of instances where aggressive originators reach out to people either through social media or other means, but they’ve had very lengthy conversations with people to try to get them to do things that were not in their interests,” Mulino said.
The minister said it was “absolutely critical” to restore confidence in the superannuation system.
“It goes without saying that it’s important to explicitly say that we need to have a system where people can have confidence that in areas where there is strong government oversight and where there is government badging that people can feel confident there is appropriate oversight of the system,” Mulino said.
ASIC has cancelled the licences of all licensees involved in the Shield and First Guardian collapses, except ASX-listed Sequoia owned InterPrac Financial Planning, and has banned several advisers.
The regulator is also currently in court against Ferras Merhi, who is alleged by ASIC to be a central figure to the Shield and First Guardian investigations.
Merhi has also been accused of receiving money from the two funds to help market them to clients and of providing advice that violates the best interests duty.
The regulator has reached a deal with Macquarie, which will remediate all Shield clients on its platform who held investments in the failed scheme.
Netwealth has requested government assistance to remediate affected clients, and Equity Trustees and Diversa Trustees are expected to do the same.
Mulino has written to APRA about what further actions are need in relation to platforms; to ASIC about whether capital holding requirements of MISs are sufficient; and noted the work the Financial Services Council is doing to develop best practice principles for trustee governance.
“ASIC to date has been focusing on protecting investor funds and that’s been the right focus. We’ve seen the agreement with Macquarie which is a very good outcomes and there are further actions in relation to other platforms,” Mulino said on Wednesday.
“There is also the upcoming review of the CSLR. I just foreshadow that’s an active area of government consideration and I commit to working closely with all parts of the sector in moving forward.”
