Bill Shorten on the Government’s reform agenda: “I like planners.”

TATE: I understand, John. But if you can explain to the room also, most people, when you ask them, “How does a platform work?” the platform operator can’t explain how it works, and where all the money comes to and goes from.

SHUTTLEWORTH: Let me explain, for the benefit of everyone in the room how it works because I think it’s really important, and I think it’s a very clean model. You basically have an administration fee, you have an investment management fee, and you have an advice fee; three fees. How the big platforms work is that they will go to a player like Count and they’ll say, “You’ve got $6 billion, we’ll provide you administration services for X basis points”. Count sets a price…in the market. It is based on the platform administration, and the dealer group absolutely receives the revenue for that.

But if you look at what a dealer group does, it provides compliance, it constructs an APL, it has practice management; dealer groups need to be profitable in order to sustain an effective model of the advice business. Our absolute belief is that those payments don’t create a conflict because they’re a business-to-business payment. We refer to platforms more as a service because you’ve got 800 managed fund, you’ve got direct equities, you’ve got cash products, and they’re really a supermarket that’s provided and they’re effectively (unclear) payments. But platforms are actually central to a whole lot of the discussions.

TATE: I understand that, and it’s appropriate the Minister responds to those range of views; however, I just make the point that Count say they are a fee-based business, and if they were simply selling advice for a fee, they would be profitable regardless of whether there was any product involved or any volumes on platforms or not.

SHUTTLEWORTH: Yeah, so it would be good to hear from some of the people that operate dealer groups around fees that they make, and get their views because I think it’s an important issue.

PERKOVIC: It’s unfair to attack a business that has actually negotiated a rate, so you know, while the fees paid to the dealer group, advisors within that group don’t pay an additional fee to be part of that dealer group; and because of the research and issues that came through, Count is a business that had no collapses through the GFC, had no – and invested in no products that had collapsed, and I think that’s the only one that’s got that track record. So the money does go somewhere, Colin.

TATE: The point simply we’re trying to illustrate here is that if advice is being sold on a fee-for-service basis, that needs to be a quarantined, profitable business model, regardless of incentives around product. If you want unconflicted remuneration model and structure of industry – and most people don’t understand how the platform model works – this is an ongoing issue for government to get their head around.

Is it just in the coalface between an adviser and a client, but back behind that person sits a whole bunch of other organisations and other forms of remuneration which can bring issues to the industry and its credibility.

BROGDEN: What’s very clear is we haven’t done ourselves any favours as an industry developing a phenomenally complex system.

To that end, what we realise – and say this with the utmost respect – is when your predecessor, Bill, made the FoFA response, the Ripoll, response on 26 April, what we discovered very soon thereafter, particularly with platforms, was that there was very low level of understanding in Treasury; and that’s only because they’ve really never had to deal with this before in any complex detail. It’s really been regulated and dealt with by ASIC – I mean I don’t know that the word “platform” appears in any legislation anywhere, for example. So we’ve been very pleased because Treasury’s been happy to go down this process and understand this in detail, but it is fair to say this, as I think I said to you earlier this week, remains a very complex issue and one that, at the very least, runs the risk of eliminating benefits to consumers of being part of the discount.

I mean if you’re a consumer purchasing a product which goes through a platform and up to an investment product, say, at Aberdeen, and Aberdeen pays a discount coming back down, and if you knock out all rebates, you knock out the benefit the consumer gets in that, you know?

In other words, you buy 100 Commodores, you get a better deal than buying one Commodore. We can’t risk consumers losing out in that track.

SHORTEN: Gerard; and then I might comment.

NOONAN: Thanks, Minister. There’s about 125,000 members in Media Super, and for them, the actors think that a platform is a thing that they actually act on.

SHORTEN: It’s a political term too. It’s a little more rickety, but anyway.

NOONAN: So for not only the actor members, but also for printers and for journalists, and so on – and I know people around the table think that journalists are smart, but I can tell you, because I know a lot of them, that they’re financially pretty dumb as a collective group – the issue about platforms is a complex one.

But I do know, in the area of financial advice, we have leakage at the top of our membership, usually with the high net worth people, right? They’re at the top, and I know that none of those 125,000 members have got there because a financial advisor has said, “You should be in Media Super because it’s a really good fund, because it makes X per cent per year, and it’s really cheap.” Not one of them has. From the point of view of – me, as a trustee, a chair and a trustee of that fund, that’s a really big issue to me.

Part of the solution would be…that financial advice has got to be the interest of individual people; that would be a starting point, and I know that’s where the Minister’s headed.

SHORTEN: I’ll make a couple of points, but people obviously are interested in this. First of all, we have said that we are going to put in a prospective ban on conflicted remuneration structures; we have said we’re going to introduce a statutory fiduciary duty for financial advisers; and the introduction of an advisor charging regime. But the other point I wish to make beyond that is that we’ve started to engage and consult because one thing I think again using the first term as a reference of the government is there’s the law of unintended consequences, and that a good idea is most vulnerable at the implementation stage. So we are fair dinkum about consulting, and that means that the consultations will go into early next year, we will have an exposure draft by the middle of next year, we aim to have legislation in the spring of next year.