What is keeping financial services directors up at night?
More than three-quarters of financial services directors expect to see an increase in regulatory compliance requirements, according to the Australian Institute of Company Directors (AICD).
In the organisation’s latest Director Sentiment Index for the first half of FY24–25, it said confidence has rebounded for the first time since 2021. However, the overall index remains in negative territory, held down by global economic uncertainty.
Some 59 per cent of directors said compliance and regulation were the main factors affecting their board’s risk appetite.
Just over two-thirds (67 per cent) of directors expect regulatory compliance to increase over the next 12 months, and this rises to 80 per cent for those working in financial services and insurance. This was the highest proportion of all the sectors surveyed.
Regarding what keeps them up at night, the AICD said there was a “significant increase” in concerns about global economic conditions from directors in this sector, which rose from 19 per cent in the previous survey to 32 per cent. Other concerns were domestic economic conditions, legal and regulatory compliance, and cyber crime.
With the federal election just weeks away, directors in this sector expressed the highest concern for future productivity growth over the next three years at 46 per cent, compared to 35 per cent on average, and believed it was the top issue that should be addressed by the federal government at the upcoming election.
Some 31 per cent of directors in this space nominated the economy and economic management as their top issue, which would decide their vote, followed by reduction in red tape.
The Financial Advice Association Australia (FAAA) recently identified a reduction in red tape as one of its election priorities, through a “financial services razor-gang”.
Financial Services Council (FSC) chief executive, Blake Briggs, also voiced at an industry event earlier this year that the regulatory pendulum has “swung too far” over the last decade when it comes to financial advice, and it is appropriate to revisit some of Hayne’s recommendations.
“I would start with the fact that the regulatory pendulum for the superannuation, funds management and financial advice sectors has swung too far over the last decade – under successive governments,” he remarked.
“The Financial Services Royal Commission shone a light on, and addressed, some of the systemic issues in the industry. The royal commission, however, is not the sacred cow that it once was.”
A new priority for directors overall for the half was US-Australia trade relations, with 88 per cent expecting escalating global trade tension likely to threaten Australia’s economic outlook and 90 per cent expecting it to threaten the global outlook.
The AICD survey questioned over 1,000 directors between 19 February and 3 March across Australia.
AUTHOR
Laura Dew
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