Rantall: Michael, no one is saying you shouldn’t notify your client every year what you’re going charge them, and they’ve got a perfect opportunity to opt out of that. But the principle of legislating the contract between an individual and their professional is a world-first, and why would we go that way? It’s the thin edge of the wedge.
Whiteley: It’s not about that, it’s about getting somebody to agree…
“I would say to you, it is not in the mutual interest of everyone at the table to keep arguing about more regulation”
Rantall: It is about that, David.
Whiteley: It’s about getting somebody to agree that they’re going to pay the following year for services you are going to provide. Now the evidence is, and there’s evidence from ASIC, there’s evidence … that the vast majority of financial planners do not see their clients regularly. And all we’re actually saying is, get the client’s approval: Yes, I’d like to receive some services next year, and I agree to pay for them.
Hockey: Look, can I just give a word of caution? One of the reasons why there has been such enormous growth in self-managed super funds is because people view superannuation money as their money. Now the industry, as clearly illustrated here, argues about how they can get greater control of more of the pie. That’s all you guys do, right? But I just issue a word of caution. The punters out there are getting increasingly restless about greater regulation of their lives. And if it’s their money, they want to have control of their money, to meet their needs, on a day-to-day basis. So, I would say to you, it is not in the mutual interest of everyone at the table to keep arguing about more regulation.
When I introduced FSR, the life insurers were the ones that gave me the greatest grief – Pauline might remember that. I stood in front of 400 life insurance brokers at the Gold Coast with Max Walker as the MC, saying, “I haven’t seen so many bouncers”. And I was booed and jeered, and I said, “Well guys, you’ve got choice: you can be an industry or a profession. FSR makes you a profession, but if you want to be an industry, you will be ‘technologied out’.”
Rantall: And we chose profession, Joe.
Hockey: They did and to their great credit, the financial planners did a lot of damn hard yards and they lost a lot of skin, a lot of skin, and I’m forever grateful to the financial planners. But what’s happened is you’ve had aggregation come out, as you know; the big players, superannuation providers, take over all these financial planners, and the trusted insurance broker has become a dying breed. And they’re the person that used to do the one-on-one work, and provide financial advice.
John Brogden: When Chris Bowen released the FoFA, paper on the 26th of April, last year he said there were twin objectives, and we always have to remember there are twin objectives, with FoFA. One is to improve transparency and to reduce – he didn’t say eliminate – to reduce distortion. And number two was to make it more affordable, more accessible. I think we risk, frankly, not achieving one of those two objectives.
We all want scaled advice to work, and we want Australians who aren’t getting advice now to access scaled advice. But it just won’t happen overnight. We have to understand that, and the worst outcome is if it gets tested in court, and the like. But scaled advice is important.
And then you come to intra-fund advice and there is an active debate between general intra-fund advice, and personal intra-fund advice.
You can’t have personal advice in the intra-fund space that’s exempted from FoFA, and personal advice outside super that is included in FoFA. You just can’t do both, if you’re going to have a consistent system. And this is even before we get Greg Medcraft’s set of reforms on professionalism.
Tate: Warren, there’s been a lot of criticism of the Government’s policies, that we’re killing active management, and that the policies, going forward and the pressure on fees, means that active management will no longer be part of Australian portfolios, super portfolios. Others would say that active managers are killing themselves by not performing. Could you make some comment, and maybe, also, Gerard could make some comment on this?
Warren Chant: It cuts to the heart of whether MySuper is necessary, and we’ve long said MySuper is not necessary, and we think that it’s going to lead to some unintended consequences. The major ones are that it will be a focus on cost. It’s all very well to say, we want MySuper [to be] simple and low-cost. The best performing funds in the land are not simple, and they are not low-cost, at the investment level. And they have done a very good job over a very long time and, substantially, management has been active. So when you have something that says “simple, low-cost”, what you will find is a focus on cost; you will have the retail funds coming out with products that are substantially indexed and when they’re substantially indexed there’s two things: you’re giving up the possibility of earning extra returns for active management; and you are limiting the universe of investments.
