4 Jun 2014
Financial Services
The Hon. A.L. McLACHLAN ( 15:28 ): Many in this chamber will recall that before I came to this place I worked at the University of Adelaide at the International Centre for Financial Services. Prior to my residence at the North Terrace campus, I enjoyed a career in financial services, and today I rise to speak about the importance of the financial services sector as a potential growth industry for South Australia.
By way of background, I should mention that the financial services sector in Australia is a significant economic contributor to the generation of wealth in the federation. Further, the wealth management sector, as it can also be described, is a source of export and employment in its own right. Funds under management in Australia total an estimated $2.1 trillion, which is the fourth largest asset pool in the world and, more importantly, it is still growing. In fact, funds under management are expected to triple in size to reach $7.6 trillion by 2033.
The Deloitte publication entitled ‘Positioning for posterity: catching the next wave’, identifies the growth opportunities that exist in the wealth management sector. Disappointingly, the potential for growing the industry in this state has been consistently overlooked by the government. Of the seven strategic targets outlined by the Labor government, there is no aspiration to nurture new economic drivers in the state. We continue to focus on the traditional food and wine, growing advanced manufacturing and realising the benefits of the mining boom for all.
While these are important, I submit that South Australia has the potential to achieve more than just the current government’s obsession with creating a vibrant city. South Australia has the potential to create a unique, diversified and vibrant economy that will secure and sustain it in the coming decades.
All good investment managers know that to keep a client’s money growing with a sensible level of risk, diversification of the asset base is essential. As with investment portfolios, we must seek to mitigate the risk to our economy by continually seeking to diversify into new industries. South Australia has an opportunity of developing a strong financial services sector focused on niche areas in which the state already enjoys some national leadership.
On the national stage, Adelaide is identified as being the centre of gravity for self-managed superannuation. Since the 1990s, self-managed superannuation funds continue to be the fastest growing sector of the Australian superannuation industry. Our state not only has resident firms that are expert in the provision of self-managed superannuation but also one of the leading professional bodies is headquartered in this state. The SMSF Professionals of Australia Association (better known as SPAA) was founded in this state and now has well over 2,000 members. The association endeavours to be the pre-eminent professional body leading the sector. It is committed to raising industry standards and looking after the needs of self-managed superannuation fund professionals across Australia.
We have credit unions and friendly societies of all sizes. One of the largest credit unions in the country, People’s Choice, has its home in this state, as does the friendly society Lifeplan. In banking, Rural Bank governs its national operations from Adelaide. In addition to the strong base that already operates in the state, there are a number of government agencies that conduct wealth management or related activities.
We also have the advantage of world-class universities that teach the disciplines required by the industry. Further, there is an ever-increasing number of students from Asia learning at our universities the skills to take them into the commercial and financial marketplace. As each year passes, our reach into Asia grows. South Australia is therefore well placed to capitalise on the strong growth in the Asian financial markets.
In the Asian region an estimated three billion people are predicted to join the middle class by 2030. By 2050, the Asian region will account for half the world’s financial assets. It is acknowledged that to build a vibrant and niche wealth management sector will not be without its challenges. There are significant hurdles to overcome. I submit to the chamber that they are not insurmountable, nor should these challenges discourage us from pursuing the growth of participation in the industry in this state. The market is highly competitive.
However, changing technologies and travel options mean that the provision of services, including advice, effectively can operate out of regional centres. Location is a diminishing factor in determining whether opportunities can be captured. A lack of focus on the local industry has meant that many government funds management contracts that could otherwise have been managed locally have instead been sent interstate. This means we have missed the opportunity to incubate and nurture local capability and talent, but this can be corrected.
There is no reason Adelaide cannot be like Boston, which has a vibrant industry alongside New York, or like Edinburgh alongside London. However, for this aspiration to be realised the government must take the lead. We must build upon our existing talent pools to create a critical mass in the skills required to attract the wealth, not only within Australia but also in the Asian marketplace. I urge the government to take a more active interest in the wealth management sector in this state.
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