ASFA spearheads ratings initiative
The Association of Superannuation Funds of Australia (ASFA) has undertaken to spearhead the formation of a new industry-wide framework to rate the risk, return and liquidity of all investments products.
It represents a ‘second stage’ of an existing ASFA and Investment and Financial Services Association initiative to devise a method of classifying assets into growth and defensive investments.
ASFA announced the second stage initiative at a meeting on March 10 of the Financial Services Working Group, set up in May last year by Federal Superannuation and Corporate Law Minister Nick Sherry to investigate simpler Product Disclosure Statements (PDSs).
ASFA policy and industry practice director Melinda Howes called for the co-operation of the various representative organisations that are members of the working group, which includes Treasury and the Australian Securities and Investments Commission (ASIC).
This month’s working group meeting, ‘Understanding and communicating risk in PDSs’, unusually included a public information session on the topic, attended by invited delegates from across the industry.
Howes asked the groups to join a series of ASFA-organised round tables to “come up with a better framework to measure the risk of an investment portfolio than we as an industry have at the moment”.
She envisaged the new framework as “an alternative to using ‘growth’ and ‘defensive’ (labels) as the industry’s primary method of describing risk to a customer — because everyone has different ways of doing this”.
“There are also so many different asset types now that there’s no longer any meaningful description of these as growth or defensive investments, whether it be a super or investment product.”
Howes told Money Management that ASFA is already in separate discussions with ASIC (and other groups) over the framework, and has asked for the regulator’s participation.
“My focus now is to get a working group together, comprising the regulators, academics, investment professionals as well as key industry people, and really start brainstorming a way forward.”
She said ASFA envisages the framework being a “scaled system where all investment products are rated from zero to 100, according to their risk, return and liquidity”.
ASFA also envisages there being three potential ways the new framework could be ‘operated’ once implemented, according to Howes.
Recommended for you
Ahead of the 1 January 2026 education deadline for advisers, ASIC has issued its ‘final warning’ to the industry, reporting that more than 2,300 relevant providers could be on their way out.
As high-net-worth investors look to opportunities in alternatives, Praemium has revealed that advisers who can deliver on this demand tend to have deeper relationships with their clients as they are seeking more involvement in the investment process.
As adviser-client relationships stabilise, Investment Trends’ latest report said digital hybrid advice models are key to addressing the supply-demand gap in Australia.
A Koda Capital partner and executive team member, who joined the firm from almost a decade in advice roles at AMP, has departed the wealth manager.
