Jeremy Cooper, chair of retirement income at Challenger and a former ASIC deputy chair whose name is synonymous with the Cooper Superannuation System Review, has called out the state of the advice industry for being in worse shape than it was a decade ago.
“I just wonder whether in time we are all going to live to regret what’s happened and it will be to the detriment to many Australians who with our relatively complicated system [and] aren’t getting the advice they need,” Cooper said during a conversation with David Bell, executive director of the Conexus Institute, as part of its ‘Exploring Big Ideas’ series.
“It [advice] has always been a difficult area [to regulate] but I can’t help thinking it’s in a much worse shape than it was in 2010,” Cooper said, while noting the regulatory imposts that were too significant to overcome have also stymied the advice industry since the Hayne royal commission presented its findings.
“The big four in one way or another have effectively exited the advice space – in some cases quite brutally – without a peep out of Canberra.
“If large and well-capitalised and very well-regulated banks can’t give effective advice to ordinary Australians because its seemingly too difficult, then who else can?” Cooper posed during a wide ranging conversation in which he also described his role during the super system review ten years ago from which the MySuper framework was created.
Time for big ideas
Bell and Cooper discussed reviews and policy settings, the concept of libertarian paternalism and why now is the right time to bring big ideas that could shake up the status quo.
“It is an upside down world but… I think in times of crisis like this very interesting things can happen. We have seen federation done differently, we have all been watching a national cabinet operate that didn’t exist previously and there is room for good ideas, and even if they don’t get taken up immediately I would urge people to think that times like these are good times for big ideas because people are looking for them,” Cooper said.
The digitisation of financial services and financial advice could be an opportunity for a rethink in regulation and policy, Cooper ventured.
“Often with regulation you are fighting the last war,” he said. “We still have this world of statements of advice, but maybe what we should really be regulating is who build this algorithms and what does it do, how will it work.”
Back to the 1990s
“Once financial models are all carefully regulated you might be able to ease off on some of the other [regulatory] things that were effectively thought of in the 1990s,” he said.
Current regulation is designed to address to a vertically integrated system we don’t really have any more, Cooper noted, “apart from some small exceptions – and a fairly large one that’s being assembled at the moment,” he said, alluding to IOOF which this week acquired MLC and its network of advisers.
If Cooper had any insight into what the findings of the Retirement Income Review might be – a review that’s now completed and is sitting in Treasurer Josh Frydenberg’s hands ready for release – he didn’t give much away.
“Unlike my review this review has not leaked a single thing, it’s been very tightly run.
“We know there are to be no recommendations, that it’s to be fact based… we do know that it’s 650 pages long, it is likely to deal with whether proceeding with the 12 per cent SG makes sense or not… What it was asked to do was to look at the distributional fairness and the interplay between aged pension and super,” he said.