COVID-19 doesn’t care if you’re the president of the United States, Tom Hanks or Novak Djokovic.
Times of volatility will always bring winners and losers, but in some ways, the past year has also levelled the playing field.
In 2021 we will see this reflected in financial services more than ever, with the regulator actively assessing the value the sector places on its customers.
APRA and ASIC have spent the last couple of years looking at changes that could be implemented post Royal Commission and turning the cogs to better protect Australians.
This new regulatory environment is a forced shift in perspective for the finance sector – to not just think about whether they are within the law and playing by the rules, but whether they are truly serving their customers.
The Royal Commission was the first and last warning and now it is the expectation of both the regulators and consumers that the finance sector be customer centric in the design and distribution of products, and transparent in interactions and communications.
Many new regulations were already hard at work on January 1st.
Grandfathered conflicted remuneration for financial advisers has ceased and while reporting on this has been slowed by the effects of the pandemic, changes in fund flows will speak for themselves.
A fairer playing field has also been marked for the business sector with larger corporations obliged to commence reporting on their payment terms and behaviours for small business suppliers. The aim is to drive down the time it takes companies to pay small businesses, eventually in line with the Government’s favoured 20-day terms.
The second half of the year will see the spotlight on the superannuation sector, with the APRA performance test to commence in July, linked to its My Super Product Heatmap methodology released in 2019. The jury is still out on the accuracy and effectiveness of the heat map and performance test, but Australia’s ageing population will be the judge. They will no doubt vote with the movement of their super accounts before the year is out, and it will be closely watched by those who have tapped into their superannuation during the recession.
When we flick the calendar to October, designers and distributors of financial products better have a water-tight case for how they are servicing customers appropriately. The Design and Distribution Obligations cast a wide net and will apply to credit products, insurance, asset management, superannuation and derivatives.
If you think that’s the last we will hear of game changers from the Royal Commission, it’s not. In 2022, APRA will extend its MySuper heatmap to include insurance.
In order to service all of these regulations, the finance sector must draw on more data about its customers, which as we know is a minefield in itself and once we get past GO on the COVID game board, the data governance will likely create a whole new set of playing rules.