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

TATE: Are you confident you’ll get that through?

SHORTEN: Yeah, because of the following reason: for the zealots who think that all financial planners are evil money-sucking leeches, I don’t agree with that, and some people – you know, that is some of the debate. The Financial Planner Wars have been a bit disproportionate in the rhetoric. But by the same token, for those who think that volume rebate’s an unmitigated good – well, whilst it’s a complicated structure, there’s some arrangements that seem to sort of pass the smell test, and there’s others which I think are opportunistic.

So there will have to be a meeting of minds in the middle and people in this room will be part of doing that.
I take a consumer view on it. People can get better returns if they invest in riskier products. People can get better returns if they can find a sweet spot of tax minimisation. There’s a whole lot of reasons why people have high performance – you know, better or worse accounts – but I also see the aftermath of poor advice or indeed, not poor advice even, but malfeasance; that’s where people lose their money. So I reckon here’s a lot of points, and the other thing which, in terms of the negotiations – and these are observations, rather than some definitive statement of the future – is the transition timetable will be important.

I get that if we’re going to change something, it has economic consequences for people. I used before perhaps in an oblique manner, quite often many organisations will have a plan A, which is to fight and resist, but you always have an exit strategy, I learned that very, very early on in industrial relations. If you’re not winning, how do you exit in a way in which is a still a bit of a win? So I should say, on a positive note, to those who might be negatively affected by change, you know, I’m open for discussion on transition. I get if contracts have been entered into, I get that people have made arrangements, so let’s be pragmatic about, not that we’re going to change, but trying to do the change in a way which tries not to see too many losers in the short term.

JOLLIE: Just widening the debate slightly, Cooper addressed the issue of disengagement and I think what wasn’t addressed was education. Why would members disengage in the first place? I think there is a lack of confidence in the industry, at the moment, a lack of confidence in financial advice. I think the advice industry, in particular, copped a pretty raw deal out of the last couple of years. How do we change that? Obviously, we improve the system, we can eliminate conflicted remuneration structures, we can improve the structure of superannuation, there’s a lot of things that we’re working towards. But one thing that hasn’t been addressed is education, and I firmly believe that, given we have a compulsory superannuation regime in Australia, where we’re pushing consumers into a system that they don’t understand, and because they don’t understand, they don’t engage. To that end, I think we need to go back to the grass roots; I think we need to go back to school…to really teach the fundamentals of superannuation, the fundamentals of investment markets, so people aren’t jumping in and out of markets when, as soon as markets fall, you have this mass shift out, as we saw, into cash. That’s a classic way to destroy wealth. We need to educate consumers on the benefits of advice; really, it’s a case of understanding what you don’t understand.

TATE: Education, perhaps, and also embedding it into the high school education system, which was discussed last term, but nothing, I don’t think, happened with that. Minister?

SLATTERY: Yes, it has happened; it’s started. It’s actually in (Grade 4 and Year 10. The financial literacy has already started programs.

They’re in pockets around Australia as part of financial literacy and production, so it’s already started, and working very well, actually, at the moment.

All of that’s part and parcel of the future education options that are actually in place. There’s quite a structured program for, it at the moment.

And it is in place. Actually, if I could comment, Brett, I agree with the education, and I would link it back to that confidence issue. Our system is actually set up under the financial services regime; it was set up for the consumer, but in actual fact, it’s actually benefited the industry, and what we need to do is we need to move it back to the consumer, so when Mark and Richard talked about just financial planners, I’d actually talk about the entire sector itself.

So one of the things that I would like to put on the table is: if you have a profession, rather than some kind of disparate advice [industry] where the consumer has no idea where to go, and perhaps the language is not uniform and imparted from an information source, then perhaps, you know, the issue of a fiduciary duty, conflicted remuneration, all of those have actually become secondary issues. So really, what we should be looking at is making the regime less costly, so that everybody’s not paying full-tote odds for everything to happen, and the licensing regime, you can actually bring back into a profession and separate out the advice capacity and use competency as a guide, and perhaps regulate competency instead.

So I was just wondering whether or not I could put on the table the issue of raising competencies and actually making that the formula, and creating a profession, and then like, as I said, all of the issues that we’ve been discussing for the last couple of years will actually fall into second place, and the statutory duty should actually account for that as well.

LEGGO: I’ve just been writing down single words, and the words that have come out are: certainty, adequacy, consistency, confidence, engagement, and now we’re adding education as well. If we look at the fundamentals of what we’re doing, and I know in our fund, each of those things are incredibly important to ensure the ongoing viability of the fund, and benefits for the members that we’re ultimately there for. I’m certain, from the education perspective, I’ve recently had the opportunity to speak to some late 20, early 30-year-olds, and I can tell you that their level of engagement, their level of certainty, their level of consistency and what they thought of superannuation – yes, they would like the 9 to go to 12, but they also don’t believe that the system won’t change so many times by the time they get to 60.

SHORTEN: If people are disengaged, that doesn’t mean that people are stupid. You know, I think there’s a challenge. You know, there’s large car companies no longer working in America who used to build one product and because the customers – because they didn’t change their product with the times, their now out of business. You know, I think if the customer’s disengaged, there’s a challenge for you, as opposed to the customer.

You know, I support compulsory voting, but I don’t require that voters have PhDs before they cast a vote. You know, it’s just – there’s an element where we accept it’s a compulsory system, and people will kick in; and I’m excited, I think more people are engaging, but I think there’s other challenges along with financial literacy towards engagement: it’s the fees you charge, it’s – it would be really good if the industry didn’t always complain about each other to the press, because that undermines confidence. Now, it’s bit of legitimate healthy competition’s fine, but every time we run down some other segment of the economy, you’re actually tarnishing your own brand. It’s a bit like when politicians complain about their own wages; they tarnish the professionalism of the politicians, so there’s a challenge there, I think, in terms of talk about the issue, but not – play the issue, not the man, so to speak.