6: Consumer outcomes

The financial system should meet the financial needs of Australians. Consumer outcomes can be enhanced by supporting effective competition in the system, which can drive lower prices and encourage innovation. Further, the regulatory framework of the Australian financial system is designed to protect consumers through prudential regulation, generic consumer regulation, and licensing and conduct obligations. Fundamental to the financial system operating effectively is the appropriate allocation of risk between participants. Consumers, like other participants, must take responsibility for both the risk and reward of their financial decisions.

The Inquiry has made the following observations about consumer outcomes in the financial system:

  • The current disclosure regime produces complex and lengthy documents that often do not enhance consumer understanding of financial products and services, and impose significant costs on industry participants.
  • Affordable quality financial advice can bring significant benefits for consumers. Improving the standards of adviser competence and removing the impact of conflicted remuneration can improve the quality of advice. Comprehensive financial advice can be costly, and there is consumer demand for lower-cost scaled advice.
  • Technological developments have the potential to reduce insurance pooling. This will reduce premiums for some consumers; however, others will face increased premiums, or be excluded from access to insurance. Underinsurance may occur for a number of reasons including personal choice, behavioural biases, affordability, and lack of adequate information or advice on the level of insurance needed.