Click to listen to Ted Richards in conversation with Senator Jane Hume about robo-advice and regulation, the consumer advice gap, and the COVID-19 pandemic.
In this episode I speak with Senator Jane Hume, the Assistant Minister for Financial Services, Fintech and Superannuation.
Senator Hume was elected to Federal Parliament in 2016 and was appointed to her ministry position in May 2019. Before entering parliament, she held senior positions in the banking, finance and superannuation sectors.
We begin by discussing how the first half of 2020 has affected her portfolios and priorities during the global COVID-19 pandemic.
If we rewind to the beginning of 2020, Senator Hume’s broad plan for the year was to continue implementing the recommendations of the Hayne Royal Commision, the launch of open banking with the Consumer Data Right, and continuing to roll out planned changes for the superannuation industry.
To provide some further background for those who may have already forgotten, the year began with low levels of unemployment (about 5%), high participation rates in the workforce and low levels of welfare. Australia’s AAA credit rating was looking as resilient as ever and the Federal Government was preparing to deliver the first balanced budget in quite a while.
And then COVID-19 hit.
Senator Hume describes how this quickly required the coordination of the financial services sector and superannuation sectors to help get Australia through this pandemic. This involved the much-publicised early release of superannuation scheme. And while all of this has been going on, the original plans for 2020 have still been going ahead, despite all the disruption. For example, the Consumer Data Right (an important piece of infrastructure to allow fintech to flourish in Australia) was still launched in July this year.
We chat about open banking and what this will mean for Australians. The Consumer Data Right simplistically involves the sharing of your data with an accredited provider, and allows open banking to work. It puts consumers at the centre of the decision by taking a lot of friction out of the switching process with providers. It also gives consumers access to better products and more competition, which in turn will drive down fees.
For now it will focus on the banking sector, but in time the Consumer Data Right will move beyond financial services to other ‘grudge’ purchases like energy and insurance providers.
Senator Hume says it may be a slow burn in the beginning but, as we’ve seen in the UK, it won’t take long for it to catch on.
Senator Hume acknowledges that despite our super system being the envy of most of the world, it’s still an imperfect system. There are a lot of options out there, which can make selecting a fund difficult. On top of this there are persistent underperformers, issues around duplicate accounts, and insurances still being paid by many people who aren’t aware of what they’re paying.
We discuss the importance of getting these decisions right and the need for consumers to engage more with their superannuation.
Senator Hume references statistics that suggest only about a quarter of Australians have received some form of financial advice in the past, while a report by ASIC suggests the figure for those who have seen an adviser in the past 12 months is even lower (about 12%). The need for professional advice in these times is important, but unfortunately a lot of people can’t afford it (or advisers are unable to serve more clients). This is often known in Australia as the ‘advice gap’.
We discuss the different ways in which financial advice is becoming more accessible and affordable for Australians. Single-issue advice can help with the affordability issue for people who don’t have the financial capacity, time or need for holistic advice. Technology-enabled solutions can help solve accessibility issues people may face. We also discuss robo-advice, which Senator Hume describes as “an exciting area” as it can be a solution to help people looking for more affordable and accessible ways of getting advice.