Confidence in industry must be rebuilt

The minister for superannuation and corporate law, Senator Nick Sherry, said rebuilding confidence in the superannuation and financial services industry must now be a priority.

Speaking at Money Management’s State of the Industry breakfast seminar in Sydney this morning, Sherry said there is little purpose in pointing fingers and that rebuilding consumer confidence must now be the priority.

Sherry said that when it comes to the global financial crisis it’s important not to attribute blame.

“Anyone who suggests they can pick why and how the financial crisis was going to occur, are few and far between in the world," Sherry said, adding that we shouldn't blame individuals like planners, economists or fund managers.

Instead, the industry must now “focus on issues of today, and look at how the system can be improved”.

Financial Planning Association chief executive Jo-Anne Bloch agreed that the focus of the industry must now be on minimising the “damage and risk as opposed to simply managing it”.

Sherry said there have always been issues of contention and debate regarding the financial services industry, which can cause confidence in the system to decline. He said it was “natural that the level of critique and concern with the system will increase in difficult times”.

But Sherry said the way the superannuation system had grown over the past 21 years had potentially created a level of “over-optimism” about what would result from such a system. And indeed, for many years returns were good and the growth in the funds management industry was “like no other industry sector in Australia”.

But despite the growth in this sector, superannuation remains a system that is “not well understood”.

Furthermore, the “industry itself and funds” over the past 21 years has “focused on reporting, highlighting and boasting what the annual rate of return was”.

Sherry said too much focus on annual returns was “dangerous in a defined long-term contribution system”.

In response to research conducted by Wealth Insights that shows financial planners are doing it tough, Sherry said he was “not surprised”, saying it reflects a “significant level of broader community concern with financial markets and in some aspects with superannuation”.