Paul's Insights: Beware the regulatory risk trap
- {{x.value}}
{{ twilioFailed ? 'SMS Code Failed to Send…' : 'Enter verification code' }}
{{ completedStep1 ? 'Authentication & Security' : content.trialHeading.replace('{0}', user.FirstName) }}
{{ content.upgradeHeading.replace('{0}', user.FirstName) }}
The email address you entered is registered with InvestSMART
Please login to continue
We have sent you an email with the details of your registration.
Looks you are already a member. Please enter your password to proceed
{{ upgradeCTAText }}
Updating information
Please wait ...
Your membership to InvestSMART Group recently failed to renew.
Please make sure your payment details are up to date to continue your membership.
Having trouble renewing?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
You've recently updated your payment details.
It may take a few minutes to update your subscription details, during this time you will not be able to view locked content.
If you are still having trouble viewing content after 10 minutes, try logging out of your account and logging back in.
Still having trouble viewing content?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
Please click on the ACTIVATE button to activate your Eureka Report 15-day free trial
Please click on the ACTIVATE button to activate your Intelligent Investor 15-day free trial
Please click on the ACTIVATE button to finalise your membership
Unsuccessful registration
Registration for this event is available only to Eureka Report members. View our membership page for more information.
Registration for this event is available only to Intelligent Investor members. View our membership page for more information.
- You are already registered for this event.
- This event is already full.
- Please select a quantity for at least one ticket.
- {{ i }}
Forgotten password
Please enter your email address below to request a new password
- Indepth analysis of ASX listed shares
- BUY, Hold and Sell Recommendations
- Ideas Lab
- Special Reports
- Alan Kohler’s Weekend Briefing
- Interviews with CEO’s & top influencers
- Money Cafe and Talking Finance
- Super Advice and Q&A with Ask Alan
If one thing has been made clear by the Commission’s final report, it’s that regulatory risk can bring some unpredictable outcomes.
Regulatory risk is the possibility that a change in laws and regulations will impact businesses, markets or the competitive landscape.
Australians have become accustomed to regulatory risk impacting their super. It’s an area where the government has a track record of fine-tuning the rules. When it comes to the sharemarket though, it can be tempting to focus on market risk – the likelihood that investment values will be impacted by broad-brush events affecting the entire market.
As the dust settles on the Commission’s recommendations, we’ve seen how hard it can be to accurately pick the impact of regulatory change. As I write, shares in the big banks have defied expectations by climbing, while stocks in mortgage brokers have been hit hard.
The Federal Government has yet to finalise its response to the Banking Royal Commission, and as heads start to roll in the banking sector, we could see further volatility in financial stocks. But it’s certainly not the only regulatory change likely to impact investors this year.
Yet to come is the federal budget, a federal election and a Royal Commission into the aged care sector later in 2019, which all bring fresh possibilities of regulatory change.
Regulatory change doesn’t always come from home turf. The trade tariff wars between the US and China are an example of how homegrown businesses can potentially get caught in global cross-fire.
The question for investors is how to manage regulatory risk.
A study, some years ago, by the Australian Competition and Consumer Commission (ACCC) found that investors can’t always fully diversify against regulatory risk.
However, two important steps are critical to managing risk per se. One is to regularly review your asset allocation, and rebalance your portfolio if needs be, to avoid being overexposed to a single asset class or sector, while still staying on track to achieve personal goals.
The other strategy is to embrace diversification. By spreading your money across a variety of investments it’s possible to reduce a risk and smooth out returns. As recent events have shown, regulatory risk is something no investor can turn a blind eye to.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
