Four key themes are likely to drive the reforms to the superannuation industry proposed by the royal commission, an industry expert says.
Jonathan Steffanoni, QMV’s principal consultant - legal and risk, said super and financial products in general will look very different in the years that follow the conclusion of the royal commission.
“The future of financial product disclosure probably looks more like SkyScanner and less like an old-fashioned phone book,” Mr Steffanoni said.
Mr Steffanoni said the super reforms would be far-reaching, but one of the biggest changes for consumers would be a simplification of disclosure laws.
“Recommendations directed at simplifying the disclosure laws would benefit from considering the increasing reliance people are likely to have on the data economy, which will enable the fast comparison of financial products and allow individuals to consider their financial profile and the product that will best meet their needs,” he said.
Simplification was likely to be a big theme to come out of the royal commission, said Mr Steffanoni, but there were still fears around that.
“The demands for absolute clarity and certainty on the one hand seem to be giving way to a simpler, and more flexible, principles-based regulation.”
“While simplification can be an effective regulatory approach, it will also require that industry and the public accept greater levels of uncertainty and regulators are prepared to actively interpret and apply the principles.”
Civil penalties for trustees breaching best interest duty would also likely be a recommendation, but Mr Steffanoni cautioned that any change operates as intended and doesn’t create uncertainty.
“The reality is that actions against superannuation trustees for breach of this duty have been few and far between, and the individual complaint resolution schemes – such as SCT, FOS, and now AFCA – have been effective in addressing most individual grievances,” he said.
Civil penalties could shift responsibility from a court to a regulator, which could add an additional layer of unnecessary complication, said Mr Steffanoni.
“Adding an additional layer to the best interests obligation runs the risk of making trustee obligations even more opaque and confusing for both trustees and consumers. In a profit-for-member context, it might also mean that beneficiaries ultimately end up paying any monetary penalties,” he said.
The only other change that Mr Steffanoni predicted for the end of the royal commission was the ending of grandfathered commissions, which seemed to have universal support.
“There was only a single objection to this recommendation in the interim report. This should happen as grandfathered commissions paid from superannuation accounts serve no useful purpose,” he said.