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.
I’m normally reluctant to comment on such articles but I can’t let this one go. I’m always aghast when people from the big end of town make commentary about how rubbish the industry is, when they themselves were either directly involved or an architect of what led us to where we are now. It may be true that “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” but the problem was that these organisations did not provide advice – they sold product. I think you will find there are many many many financial advisers running their own small businesses around the country who do provide effective advice to ordinary Australians. Advice that has changed their lives for the better because it was personal. Large institutions can’t do that because they are too far removed from the personal relationship and the people in charge of those institutions still only think in terms of products that can be sold – not a service.
Ask every Australian aged 18 to 88 if they understand the laws, regulations, legal wordings, legal documents, Legal processes, Court processes and documentation wording in any report when a Lawyer has had input in it’s construction and I can guarantee 98% would say, not only do they not understand any of it, they do not even attempt to understand it, as it is designed for complexity, and deliberately structured so Legal Interpretation can allow the army of Lawyers in Australia to charge hundreds of dollars to debate and give their considered opinion, with disclaimers.
Australia has become a sick Institution, where innovation is ground underfoot by Legal Interpretation and complex laws and regulations that are killing off all opportunities across all Industries.
The Government obviously do not understand that private Business is the engine room of the economy and what does the Government do to keep the engine running smoothly?
They put a 20km per hour speed limit on a freeway to reduce potential incidents and congratulate themselves for a reduction in accidents, while ignoring the fact that the economy is collapsing.
The 2% who would say they do understand, are either lying, or are lawyers, though the Lawyers would then want to charge hundreds of dollars an hour to debate that point and of course provide a disclaimer to avoid litigation if the opaque world they live in, is turned back on them due to incorrect interpretation.
Jeremy Cooper is correct though I wonder if he understands that the main reason for the disaster most Australians now face, has come about because of Lawyers who were responsible for the impenetrable maze we are forced to struggle through and who are incapable of “clear and concise.”
It’s sad that this overreaching nanny-state regulation has created extremely self-interested behaviour where you do whatever you can to wash your hands of the blame, cost and inconvenience and handball the pain on to the next player. Every stakeholder from the top down, shrugs their shoulders and appologises to the next schmuck in line. “I know it’s crazy but I”m just doing my job”, starting with PI insurers –> dealer groups / auditors –> advisers –> clients. Best Interest Duty is meant to protect the client but in reality it is about keeping your puppet master happy, always to the detriment of the client through over complication and increased costs.