FPA/Cbus deal signals a new approach for planning industry
Mike Taylor writes that the FPA’s referral arrangement with big industry fund Cbus represents yet another indicator that, having lost the war prosecuted by the industry funds, the financial planning industry is positioning to win the peace.
Financial Services Council chief executive John Brogden recently used his participation on a Super Review roundtable to explain his organisation’s decision to enter into a policy-making arrangement with the Industry Super Network (now Industry Super Australia – ISA) by saying it reflected the fact that “the war is over”.
What Brogden was, of course, referring to was the long-running battle between the retail financial services industry and the industry funds over the remuneration of financial planners and, specifically, the payment of commissions.
And, to a degree, Brogden was correct. Not only had the financial planning industry consigned commission-based remuneration to history, but the Labor Government’s Future of Financial Advice legislation had, except for grandfathering, served to remove whatever vestiges remained.
But of course the FSC’s embrace of the industry super movement was not a precedent. The Financial Planning Association (FPA) had, more than a year earlier, struck a deal with the ISN/ISA, which is credited with having persuaded the independents in the House of Representatives to ease its way through the Parliament.
Last week, on the eve of its National Congress in Sydney, the FPA confirmed that it regarded the war with the industry funds as being over when it announced a referral deal with big construction industry fund Cbus.
But even then, the FPA was not breaking particularly new ground, with Australia’s largest industry fund, AustralianSuper, having in 2011 started the piloting of an arrangement with six dealer groups – something it signaled it would be continuing through 2012.
The arrangement between AustralianSuper and the dealer groups reflected the fact that while a “war” might have been raging in terms of the ISN/ISA’s advertising campaign attacking retail master trusts and their links to financial planners, there were those on both sides of the equation who were willing to be vastly more pragmatic.
Indeed, even before the arrangements were put in place between AustralianSuper and the six dealer groups, other arrangements had been struck for the provision of advice between individual dealer groups and superannuation funds.
One of the dealer groups which merged to form SFG, Snowball, had provided financial planning services to industry funds well in advance of the Australian Super pilot, and any examination of industry funds’ annual reports over the past five years would have revealed the degree to which Mercer was deeply embedded with respect to the provision of advice.
In other words, not everyone was a combatant in the war between the ISN/ISA and the financial planning community.
On both sides, commercial arrangements were being entered into that belied the suggestion of an unbridgeable divide.
On top of this, there was always the reality that as much as businesses such as Colonial First State, AMP and MLC could be seen to be in direct competition with industry funds via their own superannuation and platform offerings, that competitive tension belied the degree to which other divisions of the big four banks and the other major financial institutions were pursuing multi-billion dollar industry fund investment mandates.
It was always accepted that the reluctance of the retail master trusts to mount a serious television advertising campaign to counter the impact of the industry funds’ “compare the pair” campaign was based on the reality that it would run counter to the broader interests of the banks and institutions themselves.
A recent roundtable undertaken by Money Management’s sister publication, Super Review, has revealed a long-standing understanding between the industry funds and the banks.
They acknowledge that they compete at one level but cooperate and partner at other levels.
Notably, however, Media Super chairman Gerard Noonan acknowledged that his fund had withdrawn funds from the Commonwealth Bank when it believed Colonial First State was becoming too aggressive as a competitor.
Given all of the above, it is hardly surprising that many financial planners expressed the view that the truce declared by the FSC’s John Brogden and the ISN/ISA’s David Whiteley was nothing more nor less than the big four banks and the FSC’s other constituent members looking to protect their own interests.
While the FPA last week received a certain amount of criticism for the arrangement it had entered into with Cbus, there were equally those who reflected that if the financial planning industry had lost the “war” with the industry funds, it was now positioning to win the peace.
With a Coalition Government in power in Canberra and with talk of a financial system review which encompasses the superannuation industry, pragmatic heads on both sides of the industry funds/financial planning divide are looking to find appropriate common ground.
However, winning the peace does not mean that those who vigorously prosecuted the war will be left to go unpunished.
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