Speaking at the 2014 FPA Professional Congress in Adelaide, Mr Rowe said if advisers want to hold conversations with politicians about legislative changes they need think about the “public’s best interest” and not what is good for their business.
“Over the last four years I have spent a lot of time with politicians and they don’t care about you, me, or our business realistically,” Mr Rowe said.
“We are all small business people, they get that – that’s all part of their constituency,” he said.
“So all of us, as leaders in the profession, when we go and see politicians and we want to put forward an argument around legislative change, we need to be able to do that through the lens of what’s in the public’s best interest,” Mr Rowe said.
Mr Rowe also pointed out that politicians understand that legislative changes do affect business owners, but at the end of the day they will only listen to ideas about possible changes that affect the public’s best interest and how they receive advice.
“If you are going in there just to have a whinge about how this isn’t good for your business, they will be really respectful and smile at you, I have been smiled at a lot, but they will be thinking about what they are going to have for dinner that night within about 20 seconds,” he said.
“What I implore upon any of you who have got contacts with politicians, political leaders, [and] people in political parties, if you are going to have a discussion with them around things that are important, try and work [within] a public best interest framework,” Mr Rowe said.
“What is in the public interest – that is what has got to frame the conversation with a politician,” Mr Rowe said.
Funky, thank you for your comments. No reason a VI model could not include index funds; fact is they rarely do. Industry funds rarely get distribution through external advisers; my comments apply equally to industry fund VI models provided they are treated on their merits by independent non-commission-earning advisers. Agree advice should meet needs of clients, hence puzzle of why best interest test was resisted by the industry, as was the “opt in”. Can see how latter affects revenue, but can’t see why consumers should be paying amounts they don’t know about (almost always) to people they haven’t seen or heard from for years, out of their retirement savings. Costs of implementing “opt in” were ridiculously exaggerated by the industry; I presume the industry cost estimates included estimates of lost revenue for the industry, which I see as an efficiency for consumers, not a cost. Your own practice sounds exemplary, I’m curious about which one it is.
David your comments highlight the misinformation that surrounds this debate. There is no reason an indexed fund would not form part of a VI model. You suggest that using industry funds is a solution to VI without recognising that an industry fund is a VI model. Commercial success in FP is determined by whether the advice business meets the needs of their clients. Speak to the successful advice practises (of which there are many ) rather than relying on the heresay of friends who may have had a bad experience. Like any service, you should shop around and for theses debates to be meaningful the comments need to be more informed.FYI we offer both fully implemented portfolios and tailored portfolios in our practise based on what best suits the client and have done so for 20 years – so the commercial imperative is not driving these comments as you (and many others ) want to infer.
Funky Goose, because it has been shown repeatedly that the VI model biases advisers to the firm’s own products, and almost always excludes any inclusion of products that are appropriate in many cases, such as index funds or industry funds, and that bias overrides considerations of cost minimisation and diversification. And why hide behind a cool pseudonym, another example of non-disclosure of vested interest perhaps? I don’t have any stake in this game, simply voicing an opinion based on some knowledge of the industry and of issues reported in the public domain, and by friends who have suffered under the ancien rgime, and on my opinion of what is in “the public interest”. The latter concept seems to be the subject of derision by some in the industry, who believe the only issue is commercial success.
What has fee for service got to do with a vertically integrated model? All advisers now operate on a fee for service basis. VI should be evaluated on its merits. If it creates efficiencies, improves risk management and performance and helps reduce the cost to the client why wouldn’t a business pursue that ?
I’m not happy either Jan, and you misunderstood my comment. I’m against the vertically integrated models and in favour of truly independent advisers on a fee for service model. The VI model is leading to the same oligopolistic practices in planning that have been the bane of banking consumers in other product areas.
David, No one will start up an ‘independent’ advice practice when you cant sell it. Guess there is no public interest in the banks and product provider owning every advice channel. Seriously this is about independence from conflict. the independents got pineappled and you say we should be happy. Do my clients or prospective clients benefit from me closing my doors. I am interested to see what your thoughts would be if at the beginning of the week you had completed due diligence on sale of your business and price etc all finalised. Only to find out on Friday deal cant do through because i am not part of a large dealership so therefore grandfathering lost. Most expensive week of my life.
While I believe Matthew is correct for 2 reasons: (a) it is sometimes more persuasive on politicians to talk of the public interest, and (b) it is the right thing to do to act in the public interest. The latter appears not to be a strong motive for many in the industry. Business models in that industry have conflicted with the public interest for many years, but self-interest by players and disinterest by politicians had left the field unchanged for too long. One is reminded of the famous quote from Adam Smith, the 18th century economist and philosopher: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.
What is in the public’s best interest? Being able to access good advice at a reasonable cost. Simple. Making it more expensive for advisers to do business (with more and more compliance issues) only makes it more expensive for the consumer and obviously less attractive. Unfortunately the average Joe does not think they should see a planner in their lifetime, it is still a decision driven by how much money they have or somehow being forced to see one due to an event such as retirement etc.
I will tell you what’s in the public interest – the complete elimination of GENERAL ADVICE. That means ANY financial product other than genuine banking products must only be sold as Personal Advice. That stops the banks proposed flogging of life insurance and super products by tellers under Corman’s latest amendment.
Legislation must take away the GENERAL ADVICE exemption granted by Bill Shorten to the ISN. It will also stop those horrible high-risk time-bomb life products sold by the direct sellers
We cannot continue to operate under a two tiered advice regime, as it must eventually price quality Personal advice out of the market.
The AFA & FPA should help this government to shirt-front the banks and the ISN on general advice. Forget the FSC
Gee Thanks Mr Rowe. I wonder why i am not a member of the FPA. I thought the industry body was there to promote the good things we do everyday. I guess helping people retire successfully isnt enough in the public interest. Guess your fat salary kept you going to work everyday. I wonder what you were thinking when your fee paying members voiced their concern.
Well said, and couldn’t have said it better myself:
http://www.productivenetworkin…
With respect to Matthew Rowe’s comments, unfortunately it appears the politicians who are against the FOFA amendments, whilst they use the “Public Interest”, as a guise, are more interested in looking after their Industry fund mates as opposed to a commercial free market enterprise. These same people have done a better job of convincing the independent nuffies to vote down the FOFA amendments to an unworkable regime!
The FPA was responsible for doing the deal with ISA that got opt-in into the legislation in the first place. This is not good for consumers, it simply increases costs.
As far as politicians being concerned with what is in the public’s best interest, how is transition to MySuper, with cancellation of insurance and no recourse on anyone in the public’s best interest? Seriously? It is about what well get more $ flowing into the super funds that provide the best revenue to the political parties.