The Hon Bill Shorten MP, the Minister for Financial Services and Superannuation on the 15th March 2011, launched this major policy initiative.
The Australian Securities and Investments Commission (ASIC), Australia’s financial Regulator, prepared the document. They have invited public comment prior to final review of the policy in March 2013.
ASIC also launched the associated ‘Get Money Smart’ campaign on 3rd June 2012. This was an advertising campaign to promote the new ‘Money Smart’ website.
Unlike the white paper presented by Prime Minister Julia Gillard in October entitled ‘Australia in the Asian Century‘, The National Financial Literacy strategy has failed to gain the publicity it probably deserves.
Both policies may prove too costly for implementation. Critics regard them as proof that Labor is “long” on vision, but “short” on practicality. Many Australians are sceptical of teaching every Australian child one of four priority languages – Chinese, Hindi, Japanese and Indonesian. but are likely to see more value in learning how to invest wisely, and to become more financially adept.
Greater financial literacy will encourage Australians to save for their retirement
The constant erosion of superannuation savings is of major concern to governments of whatever persuasion resulting as it does in retirees having to resort to the pension safety net. Despite previous financial disasters, money continues to flood into the superannuation investment industry, and will swell to $3 trillion within the next decade.
It is ASIC’s responsibility to do what it can to safe-guard this pool of retirement savings to meet the living needs of our ageing population. With Regulators seemingly powerless to halt the collapse of financial institutions, it is easy to blame the consumer for poor decision-making.
No matter how knowledgeable consumers may become however, they will always need guidance on the risk of various investment categories and products. Arguably, investors already have access to comprehensive information and advice on-line.
- ASIC already has an excellent website. www.asic.com.au , which doubtless could be made more user-friendly,
- as does ASX www.asx.com.au
- there are also other excellent options for research. One deserving of special mention is the Morningstar website, Morningstar being a global financial rating agency floated on the NASDAQ in 2005 www.morningstar.com.au. It provides ratings for some 3500 Australian managed funds for example.
What would help retail investors most is to have a hot-line to turn to for specific advice on particular investment products. Not the comprehensive advice of a financial planner but guidance when they have qualms about the quality of advice being offered them. Such queries might be answered by straight forward advice, such as where to go for an alternative opinion or more information. But it would be helpful if an ASIC agent were willing to undertake research on particular products or schemes particularly when historical information is not available.
Can ASIC provide default budgeting and finance advice for low-income families and for ordinary Australians?
The finance industry would be wise to welcome more public participation in the decision-making process. Already many superannuation providers are catering to the flourishing self-managed super fund sector of the industry.
Financial advisers focus on providing investment advice to higher income clients, and those transitioning to retirement, with lump sums to invest. Their advice is invaluable, but in the past they have too often recommended risky venture capital projects yielding the adviser high commissions. Advisers willing to put their client’s interest ahead of their own, should consult more with other industry specialists. For example in preparing a balanced equity portfolio which minimizes risk.
The present system tends to neglect those who need it the most – low-income families. Centrelink has limited resources as do the various community welfare agencies. All would welcome ASIC initiatives.
The ‘Money Smart’ website is an excellent start to the task of assisting ordinary Australians with their financial problems. Unfortunately it is one thing to provide such an internet tool, and another matter to motivate Australians to use and apply the advice to their own situation.