When the financial services numbers don’t add up

Australian Prudential Regulation Authority is pursuing a dual role as a regulator and a national statistical agency for the financial services sector, but the evidence suggests it should narrow its focus.

The Australian Prudential Regulation Authority (APRA) does something that its sister regulator, the Australian Securities and Investments Commission, does not. It regularly produces statistics covering the investment performance and other elements of the industry sectors it regulates.

Indeed, APRA says that a part of its mission is to “act as the national statistical agency for the Australian financial sector”.

The problem is the Commonwealth of Australia already has a fully-fledged and funded statistical agency in the form of the Australian Bureau of Statistics and, on the available evidence, APRA is a far better regulator than it will ever be a statistical agency.

It probably would not matter that APRA was expending valuable resources on the collection and analysis of industry statistics if its operations were being fully funded by the Commonwealth but, in truth, those operations are being substantially underwritten by levying the industry.

What is more, where the superannuation industry is concerned, there is hardly a set of data released by APRA in any one year that does not represent ‘old news’ because it has already been published either in part or in whole by private research and ratings houses.

A classic example of APRA’s approach to being “the national statistical agency for the Australian financial sector” was evidenced in early January when it released the ‘annual’ superannuation data covering last financial year — the period between 1 July, 2009, and 30 June, 2010.

That’s right. The data was finally published six months after it was relevant.

This compares with similar data published by the Australian Bureau of Statistics covering the home building industry — building approvals and housing finance — which was published in September last year.

It also compares with the analyses provided by privately-owned research houses such as Chant West and SuperRatings that were published within a month.

There is no questioning, of course, that the range of data that APRA seeks to collect is more comprehensive than that provided by the private research houses, but when the timeliness of relevant data can be a crucial issue, it really does beg the question of whether the industry is getting good value for the levies its pays.

Then too, there were the efforts by the former Minister for Financial Services, Superannuation and Corporate Law, Senator Nick Sherry, to have APRA deliver statistics on individual fund performance — something the former minister hoped would assist members in making objective comparisons between funds based on performance and the fees they charged.

Having been tasked by the minister in late 2008, the regulator ultimately delivered the resultant data set in the second half of 2009, which was immediately criticised because in the view of many industry operatives it had failed to sufficiently disaggregate superannuation fund performance data such that consumers could identify the outcome of individual strategies.

In the words of the principal of Chant West, Warren Chant: “At first sight, the data may appear to be harmless, but that is not the case. Where the harm lies is in any

suggestion that these league tables are at all useful in helping consumers to compare and choose funds. They’re not and, rather than help consumers, they have the potential to confuse and mislead them.”

Much the same might have been said of the data covering the 2009-10 financial year released by APRA in mid-January.

Most superannuation fund executives and trustees would have already been aware of the data and, in the context of a rapidly changing investment environment, it might simply serve to confuse ordinary consumers.

Any consumer searching for accurate and impartial data relating to superannuation fund performance should be able to safely assume that the statistics collected, collated and analysed by a government agency or regulator can be usefully relied upon. Sadly, that is not the case.

While not in any way inaccurate, the APRA data is neither timely nor particularly relevant to the average superannuation fund member.

Perhaps then, in all the circumstances the best interests of consumers and the industry would be served if APRA’s focus was on regulation rather than data collection and analysis. The Australian Bureau of Statistics would seem more than capable of filling any void.