Round table 2007: Part two

participants:

MIKE TAYLOR: SUPER REVIEW

Russell mason: Mercer

Peter Robinson: SERF

phil collins: ius

brad pragnall: asfa

james gruver: mellon

fEDERAL ELECTION

I’m happy to start, given this is sort of my area. We view better super, ‘simpler super’, as sort of part of an unfinished project. Yes, the changes did improve adequacy for people with larger account balances, people near the end of their working life. It did introduce a level of simplicity in terms of how benefits are taxed, but for a significant part of the population the changes probably didn’t make a significant impact in terms of their adequacy. People who had lump sum payouts that were below the tax-free threshold didn’t really get that much of a tax benefit. Let’s be frank about that. So the issue for us, I guess, is how do we address adequacy for lower and middle-income earners. Enhancing the co-contributions, looking at soft compulsion, they’re probably two ways of looking at it. Maybe there are other ways as well to try to deal with getting enough into super and making sure that the tax take doesn’t impact adversely on peoples’ end benefit.

I agree with all that. I think that’s where the thrust has to come from. What the barbecue stopper is I’m not quite sure, but I certainly think we’ve got to now spread some things that have been put in place to the lower income earner to try and enhance the benefit. I think it’s time the Government addressed the risk insurance side of superannuation in a similar way, looking at either soft compulsion or a dedicated part of the contributions to insurance to cover the risk protection gap. We’ve talked about various seminars and so forth that we all know exist. I don’t have any magic answer to what that should be, but I think it’s time that it is addressed, as well as compulsory savings.

I guess there’s just the more general issue about engagement, engaging members. It’s still really difficult. I hear this all the time from our fund members. How do we get our younger members interested in superannuation? I think that is a joint challenge. I don’t think it is just going to government and saying fix it in terms of better disclosure or throwing lots of money at financial literacy programs or whatever. We’re part of the solution as well, but government is part of the solution as well. Most Australians are in defined contribution arrangements. They’re bearing the cost and the investment risks. I would say a significant number of them don’t realise that at all. They probably don’t have appropriate insurance cover. They probably are not necessarily in the optimal investment options. It’s really important that people get engaged.

Again, we hear super is for most households the second biggest asset after the family home, but how much time and attention do [people] pay to their superannuation in terms of making an investment option, getting appropriate amounts of insurance cover and so forth; the things that are not necessarily difficult to do and funds are trying to make easier to do; but, again, people are just hesitant to try to make those kinds of decisions, which are more often than not in their best interest to do so. So I think that’s the next thing, and maybe financial literacy is about that. Improved disclosure is about that. Thinking about how funds are allowed to offer these things is about that. So there’s a multiplicity of solutions to get that engagement level up, I think.

Brad, is it realistic to think that we’re ever going to get a 25 year old excited [about superannuation]?

No.

Or completely interested in super? As long as I’ve been in the industry, well over 20 years, we’ve had this discussion and no one has yet come up with a solution. Is the answer as simple as another level of compulsion?

Yeah, in terms of the soft compulsion solution, yes, that’s one way to get ...

It’s not hard compulsion.

Exactly. I agree with you. For the 25 year old who’s living day-to-day super is the last thing they’re going to think about, but I think sometimes we kind of clump all young people together. A 35-year-old or 40 year old with a mortgage and kids, who is starting to think about their financial future, yes, you can engage with those members to a certain degree. It is hard. They don’t have the capacity, but [they] are starting to get benefit statements that have reasonable looking numbers on them for the first time. So I think we need to work harder as an industry to engage. I think there have been a lot of good initiatives, but there’s probably more we can do. Again, making it real for people, I think, is really part of the challenge. It’s not just a matter of just having, I don’t know, TV ads with skateboarders and funky music or something like that. It’s actually about, well, what kind of messages do — I don’t know, I’ll pick some numbers out of the air — the 35 to 40 year olds, what will they respond to? We actually have to break it down even further — the types of members we’re looking at and how we target our messages and how we get them engaged; but I think policy solutions, like looking at compulsion, further levels of compulsion, are probably an important part of that solution as well.

Well, if you split the population into demographic cohorts, I guess the group I’d like to see the most attention put on is the youngest group. I think we spend a lot of time on the oldest group. We do because obviously we’re getting so close to retirement but the youngest group would cost us the least amount of money because of magic compounding, right? Yet, they’re the ones least likely today to really make significant contributions. So maybe one of the barbecue talks is actually what can we do to make super cool or hip or whatever for the young group, because, again, it would cost so little for the Government to make such a huge impact on that generation.

Perhaps we’ve also got to start thinking well outside the square and getting back to Phil with the importance of insurance, be it death or disability insurance. Again, ‘it’s not going to happen to me’ is the mentality of too many. It’s tough. Should we be starting to try and link it with health insurance? Should we be saying, yes, 40 per cent of the population have health insurance? Let them pay for it via their superannuation or let’s utilise that and somehow link it to life insurance so the two are linked together, so that if you have life/health insurance through superannuation you must have a minimum level of life insurance. That gets around a lot of it.

You’ve got to be careful about not detracting from your retirement benefits.

I have to agree with Peter on that, yes.

A contribution to cover the cost.

I agree, but we’ve all seen over our time too many deaths and disabilities where families are left with grossly inadequate benefits to cover them, a young family and, as much as we like to think it’s not going to happen to us, the statistics say it happens and it’s important and, from a pure economic point of view, someone then has got to help them support that family. So if [the family] can have adequate insurance, that’s got to be good from a community perspective.

And I think, the same as Peter’s point, which is 100 per cent valid, it’s been the issue the trustees have had in front of them for most of the time since industry funds have started and how much can I direct my members’ funds, if you like, towards insurance. Firstly, the prime thing, absolutely right, but I think we are going through a ...

Well, hang on, there’s a distinction between death and disability insurance, which is appropriate because that is your retirement income because you’re not going to be able to work anymore. There’s a distinction between that and health insurance.

So you’re addressing your health insurance?

Specifically health insurance. There’s no issue in my mind ...

Health insurance, even your long-term disability, short term — is that what you’re saying?

No, health insurance, talking about medical and hospital. No, death and disability is absolutely — get your premiums right, but fund a benefit because whether you retire because you turn 60 or because of disability or death, it’s still a retirement benefit. Health insurance is a different thing altogether and I think we need to be careful not to start pushing too many things into super without forcing a contribution to cover that cost, otherwise we’re taking away from the end benefit and we already have, to some extent, inadequate end benefits or retirement benefits at the moment.

That’s why I think it should be linked with taking the total contributions, both employer and member, up to 15 or 16 per cent. So I agree you can’t do one without — well, you don’t want to turn the 9 per cent into 7 per cent or whatever the number is, but if you could take the contributions higher, then I say why not link health insurance. And health insurance does impact on the individual’s ability to work. If they can’t afford to get their artificial hip or their knee or whatever else it is, they’re not going to be able to participate in the workforce, so it’s a catch 22.

Yeah, I think you’re right. We need to be careful. We need to be able to push up those contribution levels, and maybe we do need to have a discussion about expanding the purposes, but they need to be linked. I mean, obviously seeing the contribution levels and other purposes need to be linked together, otherwise super becomes, yes, it becomes a magic pudding to solve a lot of other social policy issues. One thing ASFA [Association of Superannuation Funds of Australia] is regularly responding to are calls from the real estate lobby that members be able to access their super early to purchase a first home. Again, would be very popular with the electorate. Would probably be very popular with our friends in Canberra as well, but would it produce good retirement income/outcomes, probably not. So we need to be very careful about how we address that dialogue and how we open up that dialogue or else, yeah, you get politicians viewing the 9 per cent as the magic pudding. That solves a lot of their problems.

I think it is only a matter of time before governments do see that as a possibility. I mean, as health insurance costs continue to blow out and the superannuation assets under management continue, they’re going to say there’s a way we surely can get these together. So I think we’re going to see some pressure. It may not be bad, as long as it’s done properly.

The alternative is to give employers greater incentive to provide health insurance. Let’s make it exempt from FBT [fringe benefits tax], disability income. The insurance is exempt from FBT. Now I know the benefit is then taxable, but, again, when you look at the social consequences, should employer provided health insurance also be exempt? Is that a way of encouraging people? I think we’ve just got to think a bit laterally and I don’t think anything should be a sacred cow; and if the magic pudding is big enough, then you could do other things.

You could do other things with it.

I agree with you right now, 9 per cent isn’t big enough to also fund an adequate retirement. If it was a lot higher I’m sure we could then use the retirement system for other purposes, and I think we should start lobbying and looking at those sorts of angles.

I think there’s an opportunity to again split it into demographic cohorts. So maybe you do co-contributions or matching contributions for the youngest group. Maybe health insurance is really more for the 30s, 40s and 50s. I mean, it’s a different group, but really start to target some of these things, because I think the challenge is trying to figure out how you make it work for everyone, and right away you come up with robots, but there’s no reason you couldn’t actually have things triggered on birth dates, for example, or whatever, and we’ve done it in the past, I think, right. So we do it on retirement and we can trigger — have birth dates trigger other events. Why not do that too for benefits?

And, in fact, one could argue health insurance is most important for retirees. They have no other income perhaps, other than their superannuation or their pension, and they’re the ones statistically who are going to be the greatest users.

That’s right. The challenge is most extensive at that point because insurance companies — you know them as well as I do — make their money on young people who are healthy and then pay a lot of money out on older people who tend not to be so healthy, but at the end of the day, hopefully, there are benefits. But if you’re only paying out at the end there’s a business problem, because if you only have elderly people it would be so expensive it would be prohibitive, but to your point, I think you’re right and maybe it’s 40 plus, where you start to get a lot of healthy people there, they can still sustain the people that are later in their life and not too healthy.

UNDERINSURANCE

Actually, is that the real answer? I don’t know.

But we all know that to be adequately covered in Sydney you probably need to be out there with about $1 million and probably a bit more than that on average. So the question is: what do we do to improve that situation? We have a nation of people who are under-insured, and superannuation is one of those great vehicles that passively gets people insured, at least to a level. Should superannuation funds not be doing more to bridge that gap?

In my view, very simply, yes. I think it should and it’s not a hobbyhorse. It’s certainly something I feel fairly passionate about. I think we’re in a fortunate position in Australia now with what we’ve done over the last 10 to 15 years. We have a regime for superannuation that has brought just about our total workforce into a superannuation environment. They have it. It’s automatically there. On the other side of the coin, we know that for time immemorial people will not buy insurance. They are sold it, and that’s pretty much the case today, and it’s not always just at the lower income, education, socio-economic area. Well-off people earning good incomes do not pay that much attention to insurance.

So in terms of how you go about getting it to them, I think the superannuation regime we’ve got at the moment is the obvious ideal mechanism.

Industry funds started off with some degree of interest in insurance, which has grown strongly to default levels, and now a number of them are looking at what should be the right default level for cover, such as the CBus exercise that we all know about, where they looked at mortgages and so forth. Now that has become possible because, getting back to what we were sort of talking about before, we’ve become a generation, if you like, in the superannuation regime. Some of the people first involved were 40 and 50 year olds getting 3 per cent contribution, with a few costs taken out, and the account balance left was very minimal. It’s very hard to direct much of that to insurance.

So that was pretty hard, but now we’ve moved past that scene. We’ve got people joining the workforce, 18 and 20, already getting a 9 per cent contribution. If we can get them to contribute a bit after tax and get the co-contribution … and get their account balances growing quite quickly, with good investment returns, by the time someone is 25 or 30, you’re actually looking at quite decent amounts of money in their account, and it again becomes an easier proposition, I think, for trustees and the community as a whole to say, okay, we can afford to give them maybe four units or they can in fact afford to give themselves four units, if you want to look at it that way, and we’ve done a lot of work in my shop to look at the effects of that, different types of insurance being added early, what it means as an impact on the ultimate retirement benefit of that person, given certain inflationary assumptions, and the bottom line is, as these account balances grow more quickly, with a higher contribution level, they are not that significant and, in fact, if you wanted to build up the difference that it creates, so to lose something of your retirement as a result of having insurance at an early age, it’s actually not that hard to do that either.

So I think we’re moving into an era where the regime we’ve got in place is ideal for moving the insurance issue up. It has to be done, though, by some sort of either compulsion or soft, whatever we called it before, because by and large people still don’t jump out of their skins to go and buy insurance. They don’t realise the need for it. So I think that’s why we’ve got a great opportunity for us here at the moment.

If there was an issue of helping members to understand the need for insurance, I think we need to look at trigger events in their lives — changing jobs, getting married. This is the sort of time when people do re-assess their need for insurance and it’s how you identify those trigger events and then get in the member’s ear. That’s what I think needs ...

You now have almost the total community involved in superannuation and not all of them insured, but a very large number, and, if you then place arbitrary points in time or changes in lifestyle that triggered new insurance, there’s no selection, or if there is selection it’s no more than what we’ve always had. People are not going to get married specifically to invest in insurance. Nor are they going to have a first or second child specifically, or, if they do, they deserve it.

Or a third child. I can vote for that one.

And isn’t it funny. We knocked the old days and some of the practices of life insurance salesmen in the old days, but some of us can remember the old days when the man from Prudential, AMP or TNG would come around and knock on your door and know that you had the child or know you’d just got married and that had its drawbacks, but it did make people focus because they’d sit down and they’d go through the insurance, and maybe they didn’t sell them the right products at times, but they brought [insurance] to their attention. One of the challenges I think funds have today and especially industry funds in this area is getting that message, because Peter, with all his members and relative small number of staff, just like every other industry fund, can’t get as readily to the members as those people did or know them as well. And it would be good to get some of those old attributes into the system.

I think there is still unfinished business in the advice regime and attracting the advice staff. Funds want to be able to — and they tell me all the time — they want to be able to communicate with existing members around things like insurance options and investment choice. Funds are offering more flexibility around insurance and the ability to take additional units. They’re offering more investment options, but their ability to actually communicate with existing members is really hampered by the Financial Services Reform (FSR) regime, by the requirement for your licence, by the requirement to hand out FSGs [Financial Services Guides] and SOAs [Statements of Advice]. Some changes are being made in the FSR regime, but they really are focused on the adviser side and where advisers are able to give advice with shortened disclosure documents. I think we need to pull back and look at what we’re calling in-product advice, so that a fund can talk to existing members about insurance and investment without having to go through all the FSR rigmarole, where there is probably minimal sort of consumer risk present from the Government and regulator point of view.

What else can we do to think outside the square? Could we give incentives to a superannuation plan, for example, to actually set up major planning? Something we could do to really encourage planning, because, ultimately, it’s going to save the Government money, us money, to the extent that we’re all part of the Government, save us all money if we can help people do better plans. So it’s in our best interest, so what can we do now to help encourage organisations to do more, because it’s a real business problem.

An employer-owned fund knows where their members are. They’re relatively geographically tight. You then look at an industry fund, any large industry fund, regardless of what industry they may or may not represent, but particularly multi-industry funds, you’ve got people who are employed in parts of Australia that most of us have never heard of, let alone been to, and they just have no chance of providing them any sort of financial planning, face-to-face financially planning. So if you’re over the phone, Linda’s advice is a reasonable step forward.

They’re the ones that need it most probably, right?

Possibly. It’s different for our fund because we actually do have a relatively tight geographic spread of members. We know where they are, where they’re employed, because they’re stevedores. They’re in the ports. That’s where they work. So it’s different for every fund, and having a blanket solution just will not work, it cannot work.

But your members don’t necessarily want a full blown SOA; an 80-page, 100-page SOA.

Absolutely. Most members want to know, ‘Should I be in this investment option? Do I need more insurance? Do I need to contribute more to achieve my retirement goals?’.

That’s exactly right.

And possibly, ‘How long will my money last in retirement?’. Well, that depends on how much you spend, of course, but it’s not rocket science.

So you take the paperwork away. If James is business development manager (BDM) for a large fund and goes to a worksite and a member says, ‘I’m a 25-year-old. I’ve just got married and taken out a mortgage. The fund gives me default cover of $80,000 for death and TPD. Is that enough?’. James has had to say, ‘Well, I can’t give you advice on that. You need to go off and see a financial planner’, when James knows the answer. The answer is, ‘No, that isn’t. How much is your mortgage? You should at least be able to cover that.’ Likewise, I’m a 60-year-old about to retire and I’ve got a $100,000 balance. I’ll definitely need that $100,000 in a year’s time. Should I remain in the growth option that I’m in or should I move to something more conservative? Again, James knows the answer and has to say, ‘Sorry, go and get independent financial advice’, especially if his fund doesn’t offer it. We’ve got to make it simpler to allow people ...

We obviously should be promoting James to more people.

I wouldn’t have liked to have given someone advice who wanted to move out of a growth option for a 12 month period and then have them come back to me.

No, but James should be able to explain ...

I think we often get too fancy. It’s basics and we diversify it, and your market timing is so difficult. Your millionaire is a trillion dollars, and if you talk to some of the people who personally manage billions themselves, they’re not trying to tighten the market. For some reason we often see financial planners and people are accepting the advice … but I think we’ve got to keep it simple and we make it too fancy. I also think the classic, a few bad apples will ruin it for everyone else, and financial planners on average, I think, in the media certainly, seem to have a bad reputation, and they’re really important. There are bad doctors, but doctors are really important and have attorneys. There are a lot of bad attorneys, but attorneys are really …

Let’s not get carried away.

Good point, sorry.

I agree with James, sorry. Planners are important, and I think that what planners do for the people who need those kinds of services is very good and very important; but the thing is that, again, Russell’s 25 year old might not necessarily need to go to a fully qualified CFP with all the bells and whistles, who then produces the 100 page SOA. The planner doesn’t want to have to do that and probably is not interested in that person as a client. The 25-year-old is not interested in sitting down and talking to the person. The 25-year-old is not going to read through the 100-page document. Again, we’ve created a regime built around, well, a certain type of the population. People with reasonable amounts of money, high network people, yes, they should go see the financial planner or the adviser. They should get the full SOA. It makes perfect sense for them, but for the 25-year-old who says, ‘Should I take out an extra unit of insurance or not?’ when he’s talking about his existing fund, we shouldn’t then trigger all these other things that have to happen, it just creates roadblocks for the ability of that person to get the type of information they need to make sensible decisions in their best interest.

And, in fact, it can actually do damage insofar as this person walks away and says, ‘Well, they’re the representatives of this fund where I’ve got all my money and they can’t even give me basic advice like that. Do they really know what they’re doing,’ and they might not understand why you can’t give the advice when it’s so obvious.

Yeah, and the other problem is that they’ve had a go at getting the advice. It’s too hard for them to go to the next stage and find someone they don’t know, so it’s like forget it.

It’s all too hard for them. We have this legislation supposedly to protect the consumers, but we’re actually creating more risk because people are not adequately prepared for retirement.

Listening to all that, I agree, but how do we actually solve that if you’re the Government? Do you say that at a certain cut off point you don’t have to relate ...

When we look overseas, other governments have figured it out, [they] have certainly made more progress than I think we have here in Australia.

I think if it’s simplified, if it’s advice within your existing superannuation product about the structure of that product, you’re not selling them anything additional.

No, nothing is being sold to them. It’s education. I think it’s education.

Yeah, absolutely.

I’d tell them which fund to buy. I’d say, ‘Listen, there’s five options and they’re based on time-wise and here’s a questionnaire’. I mean it’s not ...

That’s advice.

Have you another option?

But we need to simplify it. If it’s purely assisting them to structure their arrangements within their existing fund it does need to be simplified. The hurdle needs to be lowered.

Who’s going to read a 100-page legal document? It’s absolutely ridiculous. Besides Russell Mason, who else would read a 200 page [SOA] — and if we think we’ve protected our consumers and superannuation participants because we give them 100 pages, we’re kidding ourselves. We’re absolutely kidding ourselves. It’s time to fix it.

Yeah, our office certainly tells them why they’re losing. I find it quite ironic when I joined the industry and had a trust deed, which was a big thick legal document and a standard booklet, which was possibly only five, six or seven pages long, but it told you what you needed to know. It told you when you could join the scheme, what life cover you got on the way through, when you could leave the scheme, what you got on withdrawal and then your contract. It was pretty straightforward and you could understand it, and if you needed to dispute anything or wanted to know more detail you took the other document to someone, your lawyer or whatever, and had him consider it. Now they’ve built this secondary document, the PDS [Product Disclosure Statement], to such a form that it actually rivals, other than its pretty colours and graphs, the legal document that sits behind it. So it has duplicated something and it’s no longer useful for people as information. You’ve almost got to the stage now where you need a third one going back to the scheme booklet. So you’ve got your trust deed. Then you’ve got your big PDS. Then you need an actual summary that people are going to read.

Forget logic. How about the environment if nothing else? How about stop killing trees? Granted the fact that it makes good sense to not waste ...

Almost hijacked by an extreme form of consumer protectionism, coupled with the fear of litigation that if we don’t give them this 100 page document with every proviso they’re going to sue me if they find a mistake, and there has got to be a way around it. I fully agree, James. It has to be done; shortened or simplified with protections still built into it.

That might be the barbecue stuff then, sudden rationalisation of the PDS requirements.

My God, the printing industry would fold.

You look at a PDS and you could take a 70 page PDS and you could halve it and the consumer wouldn’t lose a single thing out of it.

In the US, just as an example, they went to simplify prospectuses. I think they’re one or two pages; really, really short. You still print one big one and if they want it, they can order it. Does anyone order it? No. But you have one there, five or 10. People use the simple part and it actually delivers, most importantly, not so much the size, but it’s actually intelligible. People understand it.

And company annual reports, the fund managers will want the full versions. Most shareholders will want an abridged version.

It’s a vicious circle really because you’ve got this document and we all agree that it’s cumbersome and no one understands it. So what do they do? They go and ask someone to explain it to them and the person says, ‘I can’t because I’m not licensed to give you that advice’. Hang on, we’re going around in circles. I still don’t know what to do.

I think the Government never really — it was never really clear what the PDS was supposed to do. Was it a prospectus or was it a consumer guide? I think, unfortunately, it drifted towards becoming a prospectus. So it becomes this full-blown document. It’s about protecting the product legally, and in the end it totally misses that role of being a consumer guide. So we need to get back to a simpler, shorter document that members actually can make sense of. I think that’s a really important thing for us to work towards.

FINANCIAL PLANNING

I think the problem is, and Brad covered this earlier, financial planners who are producing full financial reports and guidance for members are appropriate at a certain level. In this country, at this stage, we’ve taken a bit of a step forward with advice, there’s nothing to fill the gap of the lower account balance member who can’t afford to pay two and a half, three, four, five, $10,000 for a plan. There’s nothing to fill that gap for these members to help them. Now it actually raises an interesting question. We talked about liability earlier. If a member calls up and says, ‘I want advice on whether I should have more insurance’ and you say, ‘Well, I can’t provide it’, and the member then dies without having the additional insurance and they needed it, I just think morally, ethically, if not legally, the legislation may have created issues that aren’t being dealt with.

I think we want to ensure diversity and I think our industry is robust enough to ensure diversity in terms of how products are distributed, as long as people are adequately informed and disclosures are made so people can make intelligible decisions around that. As long as that’s all happening then I think that’s all well and good. I think as well, though, we need to think as a single industry; we are the superannuation industry, which is part of a larger financial services industry. I don’t think the ‘us versus them’ type of discussions do the entire industry that much of a favour. I think, unfortunately, they can have the tendency of undermining either the superannuation brand overall or the value of advice. So I think we always need to be very careful about how we actually couch those arguments at the end of the day. We’re a single industry. I think we need to operate as a single industry. I think that we’re big enough to be able to accommodate a variety of different arrangements, as long as disclosures are made, as long as consumers are making informed decisions, and I think we can sustain that.

In any profession you’ve got your rotten apples. Most of them are reasonably ethical people, but they’ve got to make a living, and the way we’ve traditionally allowed them to make it is via commission, and to expect them to change overnight is a big ask. What we’re looking for them to move towards and what we’d like is just like your solicitor or your accountant or your doctor, a fee for service basis. Allow those fees to be tax deductible. Why shouldn’t they? It’s income-producing advice. Make it easier.

Horses for courses as well. Fee for service is a fantastic idea, particularly for those with bigger balances, but commission is not necessarily a bad idea. It’s a bit like health insurance. You pay a certain amount each year and you get certain benefits when you need them, if you need them. There’s no such scheme for financial planners, but within financial planning organisations it’s similar. They’ve a commission and, provided it’s reasonable, it allows them access to planning and planning advice when they need it. There are arguments on both sides. Both work. It’s just a matter of which one works best for which segment of the superannuation industry.

And you tell me what your commission is and I view that to be a fair payment for what you’re doing for me. I agree, Peter, what’s wrong with ...

Or do they work out the fee for service? They work out what commission they would have got and translate it to dollars.

It’s flexibility. I think financial planners are an important piece of the industry, delivering advice. I think we need to do more with them, to give more advice, even to people out in the middle of nowhere. And, maybe using technology, we have to figure out a way to do that. I think Garry Weaven is right to identify there’s a real issue, making sure we’re giving advice. That’s right, that’s an issue. Financial advisers are an issue. We need to make sure we’re using them better. With respect to remuneration, like anything, there should be flexibility and people should have an option to pay for it in different ways. One way is front-end loads, back-end loads and level loads in the vehicles, which is a way where they don’t actually have to reach into their pockets and write a cheque for their financial advice. That’s an option. It should be fully disclosed, no games or gimmicks, and, to the extent there’s a product set that’s going to pay that, so a potential conflict of interest or even perceived conflict of interest, that needs to be disclosed as well.

And I think that’s a big problem. The problem occasionally is not how it’s paid for, but what you’re paying for, what you’re actually getting. Most financial planners these days are tied to an organisation, or a group, or there are firms that pay higher commission.

Absolutely, and is that okay or not, and that’s a whole other question, but ...

Well, I think it’s okay, as long as you don’t pretend to have canvassed the entire market. You go to a Holden dealer, you’re not expecting them to give advice on a Toyota.

Yes, it won’t be favourable, but you will get it.

Yes. There’s still an expectation there that that person will still take care, diligence, do their research, know their products, all that sort of stuff, as long as the consumer is aware of what they’re entering into. Again, if the consumer knows the arrangement they’re entering into, then that’s fine. They should be able to go into that branch or talk to that type of planner. As long as they’re aware of what they’re dealing with that’s fine.

For my money, everything we’ve said, everyone we’ve talked about today, has come back to the fact that the quality of advice for members of schemes is what’s important, getting the message out there, explaining to people what it’s all about, whether it’s insurance or whatever, and the financial services and financial planning industry is quite strong and provides that to a level of people. What we should be concerned about is the quality of that advice and the transparency of that advice and, frankly, whether those guys are paid by commission or fee is absolutely irrelevant, or it should be. It doesn’t matter, as long as people know.

As long as it’s value for money.

And they can see the value they’re getting. We should be encouraging that industry because we need to get advice out to the people.

Absolutely. I totally agree with Phil on that.

I agree.

Well, thank you gentlemen.