Mark Rantall must cope with three major regulatory reviews, an industry in a state of flux, and pockets of a membership that harbour great hostility. He spoke exclusively to Simon Hoyle.
The new chief executive of the Financial Planning Association of Australia (FPA), Mark Rantall, has a message for members or former members who believe the association has caved in to pressure from regulators, consumer groups and the media. “The FPA is not rolling over,” he says. “We absolutely will be the advocate for our members, in terms of negotiating with Government and any other interest groups, for those members – and it’s the majority of those members, I should say – who are doing the right thing and moving forward in helping us become a professional organisation, and signing up to the code of conduct and the ethics and educational requirements that go with that.
“Where things are not in accord with the way we think a professional body should operate, then absolutely we will stand up for that, and we’ll stand up for our members and for the great job that they do. “This is the fine line that a professional body walks, which is between, on the one hand, being an advocate for their members, and lobbying in that regard; and on the other hand, sometimes being the policeman who has to enforce the standards that professionals sign up to. “We will fight for the right things. The other things, we need to build our position in consultation with Government. There is no use in just being totally aggressive towards a regulator or the Government. It does not get you anywhere.” Rantall says the FPA is unapologetically evolving into a true professional association. And that is something quite different from a trade association, which some elements of its membership seem to want it to be.
“The real difference between an industry association and a professional association is the professionalism of its members and how they interact with their consumers,” he says. “The differentiator is all about the professional standards that the membership is prepared to sign up to; the minimum educational and continuing educational standards that the membership signs up to; and importantly, the ethical behaviour that the membership agrees to adhere to. “If you look at those three things, they’re a big differentiator between [a professional association and] a pure advocacy or lobby group, if you like. My sense is we’re the pre-eminent professional [financial planning] association in this country, and we’ve led the way in setting those standards and enforcing those standards.” Rantall also rejects the suggestion that the FPA has put the interests of the big end of town ahead of individual practitioners.
“Let me refute that statement to start with,” he says. “That has certainly not been my experience or observation, in terms of the domination of the board by institutions. “We have one individual representative who comes from an institutional background. We have two independent board members who come from more of a professional background – both legal and accounting – and then there’s three members of the board who are CFPs and run their own individual practices.” Rantall says that in the hurly-burly of regulatory reviews and claim and counter-claim by interested parties, the role of financial planners has often been misrepresented. “Who creates the public perception? It’s the media,” Rantall says. “And there are some vested interest groups who have fuelled that. It’s time for that to stop. Enough is enough.
“I’m determined to take that on, and call them on their behaviour. It’s not doing anyone any good. All of these problems have not been just financial planners. There have been systemic product failures that have hurt clients. You could argue that financial planners have a role to play in that, and they absolutely do… but it hasn’t all been just the financial planner mucking up. And there’s a big difference between bad advice and fraudulent behaviour, and I think those two things get mixed together sometimes. “I just think the whole debate has got out of perspective.” Rantall says that what is needed is “a broader vision for why it is we’re doing what we’re doing” in terms of the reviews of the industry and looming legislative changes. “Australians need to take control of their own destiny, as it relates to their financial independence,” he says. “There are a number of ways they can do that, and the three predominant ways are superannuation, investment in various forms outside of superannuation, and through having the right protection and estate planning in place – broadly.
“My view is that it’s extraordinarily difficult to build that plan on your own. My view is that getting advice from a call centre or an automated phone system – even worse – is going to leave you short on building a holistic plan. Therefore I think the role of a financial planner is absolutely critical in helping Australians achieve their objectives. “I’m concerned that that broader message, and that vision, is getting lost in the detail of the focus of some of the reviews – as an example, just focusing on costs, in itself, is not going to see Australians that much better off in their financial future. “Some of the figures that were quoted around reducing costs by removing commissions, and removing costs by driving down the cost of admin, was going to save $40,000 over an investor’s working life – but adding $20 to $30 a week, increasing your superannuation contribution or savings by $20 to $30 a week, could give you in excess of $100,000.
“I hope we haven’t given up on the concept of educating people and advising people about how they can have a better financial future. Some of the things I’ve read coming out of some of the reviews around most people being disinterested in their superannuation, for example – if we accept that position, I think we’ve lost. “And the great role that financial planners play has been absolutely underestimated, and in some cases undermined, by some of the advertising that we’ve seen, that has been funded from members’ superannuation balances. I’m not so sure whether it’s achieving the greater good. I’m not so sure it’s helping Australians, or if all it is doing is forcing them back into trying to do it themselves.” Rantall says in situations where regulatory change is inevitable, the FPA has to work constructively with lawmakers. But where it believes change may be counter-productive, it will not hesitate to fight against it.
“I’m quite happy to come out and say I disagree with removing commissions on insurance in super, particularly given we’ve got the concession of not having commission banned on insurance outside of superannuation,” he says. “It does not make sense to operate two systems. I think we’re in danger of throwing the baby out with the bathwater. “I’m not so sure what the problem is we’re trying to solve with insurance. I don’t see that insurance has been a big problem, for the Government or consumer groups. Commission in products for insurance has been used to distribute insurance for decades – car insurance, house insurance, life insurance. “Insurance is different because it’s an annual contract; the consumer has absolute control over that contract, and whether that contract continues or not, on an annual basis. That’s completely different to investments, where commissions were embedded in product, over which the consumer had no control.
“It’s an annual opt-in, the consumer has control, and provided those commissions are absolutely transparent and consumers know what they’re getting and what they’re paying, I don’t see what the issue is. “You’re not talking about people’s life savings, and the potential that they could lose their life savings, and the tragedy that surrounds that. It’s just a different product. The real danger of removing commission in super, as an example, and not outside, is that I’m concerned that the majority of people could end up dealing with a call centre or a phone system, and I’m not sure they’re going to get what they need, basically. “The other big issue that I’m prepared to fight on is opt-in. I think opt-in has the danger of using a sledgehammer to break a walnut. Opt-in could potentially be inconvenient for clients. [Reviews don’t always happen] on an annual event, on a day when an opt-in certificate is going to have to be signed and sent off to a fund manager – or whatever, because we do not know how it’s going to operate.
“But more important, I think it could be potentially dangerous; because if Cooper is right, and most people are apathetic towards their investments, the time that a client might need to be opting in might be exactly the time that they decide not to bother. A great example is the GFC that we’ve just gone through. It can be disastrous for a client to get out at the wrong time. The consequences… can be catastrophic, and very hard to recover from.
“The final reason that opt-in, in my opinion, is not necessary, is that we’ve already moved on from commissions in investment, and we’re going to be operating in a fee-for-service environment. In a fee-for-service environment, the client has absolute control over a transaction; any fees are totally disclosed; and if a client wants to stop those fees, or not see a financial planner, at any time, they have the control to opt out. At any time. Why is an opt-in necessary? Once again, what is the problem that we’re trying to solve? “And as a broad comment, I’d like to know if anyone can tell me of any profession in the world, or for that matter any business contract in the world, that operates on a fee, that has legislated opt-in. To my knowledge, there is none.”
