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How could a more competitive local FinTech market benefit Australians and their finances? Senator Andrew Bragg speaks to Miriam DeLacy on the role of both FinTech and financial planning in a better future for Australians and our economy as a whole.
Since taking up his appointment as Chair of the Senate Select Committee on Financial Technology and Regulatory Technology in 2019, Senator Andrew Bragg and his fellow committee members have been investigating what it could take for the sector to deliver more product choice and more jobs to Australia. So far the Committee has received over 200 submissions and conducted public hearings in Melbourne, Sydney and Canberra.
The final Committee report is expected to be released this month. However, Senator Bragg has already put his name to two documents detailing recommendations for the future of Australian FinTech and RegTech. In addition to the Delivering for FinTech interim report issued by the Committee in September 2020, Senator Bragg has also formed the Australia as a Financial and Technology Centre Advisory Group (AFTCAG).
The group have recently released their 100+ page report on transforming Australia into a financial hub for the Asian-Pacific region. Known as the Low report after group Chairman Andrew Low, the content is focussed on the tax and regulatory reforms that could potentially support Australia’s path to a future as regional powerhouse for finance and business. “The recent geopolitical events we’ve seen in our region are an important turning point for Hong Kong, both as a gateway to China and a tech and finance hub,” says Senator Bragg. “With the threat to the country’s national security, businesses and investors are understandably wary of continuing to operate there. This creates an opportunity for Australia to attract a significant share of this financial and commercial activity.”
As Senator Bragg points out, we are in competition with Tokyo and Singapore for the companies, currency and assets that could be leaving Hong Kong and seeking a new location in the near future. “The competition is real,” he says in his statement introducing the report. “The Low Report has made fifteen recommendations, actionable right now. We can end the narrative that Australia is too expensive and complex.” Recommendation 13 in the report calls for a ‘bias to yes’ and ‘bias to competition’ response from regulators to allow Australia a better chance to perform in the contest to become a preferred location for FinTech companies.
The benefits for everyday Australians
As Chair of the Senate Select Committee on Financial Technology and Regulatory Technology, Senator Bragg is convinced that a more competition-friendly environment for FinTech business can only be a good thing for consumers as well as the Australian economy. “Driving more choice for consumers is a key focus for our activities,” he says. “We must recognise that we in Australia have always had quite a concentrated financial sector. FinTech is something that offers a good suite of solutions, particularly after the Hayne Royal Commission which identified just how many problems the financial services sector had.”
“FinTech allows people to have more choices and more opportunities to manage their own financial affairs. The role of our committee is to recommend a framework that will harness competition to lock in those benefits for people now and for future generations. Younger people have already shown a great propensity to adopt the more flexible solutions for their finances that technology makes possible, such as Buy Now Pay Later.”
Senator Bragg and the Committee also see potential for the FinTech sector to become a major employer in years to come. Along with supporting a more customer-centric financial services experience, this is another important reason behind the work of the Committee.
“Wherever you can generate a scaleable sector like we have in Australia with FinTech you have opportunities emerging for exports and that can create new jobs,” says Senator Bragg. “While we might import Uber from the US, we’re exporting Afterpay and Zip Co to them. Whether it’s Airwallex for foreign exchange or Canva for design, we want to foster an environment that can support technology companies like these to employ more Australians.”
A turning point for transformation
Giving consumers more choice in the digital tools they use to access their finances has become an even greater priority – for businesses and policy makers – due to the pandemic. Consumers have turned to technology like never before, for their communication, entertainment, retail and healthcare needs.
Senator Bragg makes the point that any business, regardless of the sector they operate in, needs to embrace digital or risk having to close their doors. “Technology has kept society going through the last 12 months,” says Senator Bragg. “The central lesson all businesses have learned from the pandemic is that to be digital is to be durable and to be durable is to be alive. In a pandemic and in a recession the lower your rate of digitisation the lower your rate of growth is. Financial advice businesses and parts of the financial advice value chain that invest in technology will have an obvious advantage.”
In their The Advisable Australian report from February 2021 Netwealth found the majority of ‘Advisable Australians’ expect to be educated on financial concepts digitally using online calculators, podcasts and videos. An even higher proportion also look to their financial planner to offer digital material and tools to demonstrate how their investment portfolio is performing.
As Senator Bragg points out, the writing is on the wall for financial planners when it comes to incorporating technology into their businesses. Post-COVID consumers are looking for more ways to engage digitally with their finances and this is an expectation financial planners need to consider as they evolve their offer to clients.
“The financial advice industry, like every other, should be documenting lessons learned from the pandemic,” says Senator Bragg. “We’re doing that across government and looking to roll out digital ID as a result. I would encourage financial planners to think about whether they are doing everything in their business digitally. If they’re not, what can they digitise? What are the things you need from government to be able to become digital. These are things I’d like to know so I can sit down with Senator Jane Hume and work through that with the industry. I have an open door policy and would welcome financial advice businesses to come to me directly and share their issues and ideas, beyond the life of the current Committee.”
Advocating for financial advice
Senator Bragg is himself familiar with the benefits of bringing more digital tools into the financial advice journey. As a financial planning client, he also has first-hand experience of the benefits of professional advice. “I use financial advice myself and I have a financial adviser who I rate very highly,” he says. “She’s given me peace of mind about my finances that I wouldn’t otherwise have.
“More recently I’ve had access to one of the newer digital platforms for managing super and investments and it’s very clean and clear. It’s got all your information in one place which is what we’re now used to from a digital user experience. As one of the few senators under the age of 40 in federal parliament I’m very passionate about these capabilities technology can offer to make money management easier for Australians, and that includes financial advice.”
In the context of the pandemic and resulting recession, Senator Bragg is of the opinion that Australians need access to affordable advice to help them weather this challenging time for our economy. “The pandemic reminded us all how important it is that people are prepared for the rainy day because that’s what we’ve been having for the last 12 months,” he says. “I’m of the view that Australia has performed well during the pandemic. But we have more work to do before we’re going to come out of this recession and we need to make sure the micro economic settings are right.
“One of these key areas is to make sure financial advice is accessible and affordable. I believe in financial advice and I believe that it’s important. But it’s expensive. I’m personally interested in finding ways to reduce the cost of advice and improve accessibility without winding back any consumer protections.”
The accessible advice challenge
The issue of access to advice is complex and one that is increasingly being seen as a priority for the government, regulators and the Financial Planning Association’s advocacy and policy team. To emphasise how far there is to go in reducing the compliance burden on financial planners, Senator Bragg suggests bringing the issues into the spotlight.
“We need to try and simplify as much of the financial advice laws as we can so that advice is accessible,” he says. “My sense is that too few people are sitting down each year to go through everything with a financial planner. Something I’ve put forward before is for a group of financial planners representing the profession to come down to Canberra like the Heart Foundation do and provide a financial health check. I think that would be illuminating for many to see how complex it is and how redundant some of the requirements appear to be.”
“One of the important changes we’re making as part of the Royal Commission implementation is that it will be possible to get one-off pieces of advice through a My Super product. This is probably one of the main ways most people would viably pay for a piece of advice.”
RegTech to the rescue
With an extensive legislative review of financial advice regulation beginning in 2021, financial planners have some cause to be optimistic about reaching a point where legislation protects consumers while supporting a simpler, more streamlined advice process. In the meantime, Senator Bragg suggests looking to digital technology as a way to reduce the regulatory burden.
“I’m sure there are opportunities for RegTechs to navigate the complex and convoluted financial advice settings,” he says. “There is so much prescription in the way financial advice has to be provided, which concerns me greatly. The political difficulties of changing some of these laws is well known. That’s why using RegTech to address this complexity is the only solution that’s really viable in the short term. If we cannot simplify the existing laws we need to look at how we can implement RegTech in a more extensive manner.
“We’ve had legislation before parliament this year to alter advice arrangements and it’s clear that these changes to the regulatory framework never end. There has been a concern that political positioning might undermine efforts to deliver worthwhile reforms. I’m not afraid of having that argument. I think that with the consumer front of mind you can win any argument.”