But this solidarity will not come easily. Now the days of trail commissions paid for financial advice are over, the profit-for-members movement has put its advocacy blowtorch on volume rebates paid by investment platforms to dealer groups. Among the defenders of these transactions is John Shuttleworth, general manager of platforms and marketing at BT Financial Group. “Basically, you have an administration fee, an investment management fee and a [financial] advice fee. The big platforms will go to a dealer group and say: ‘You’ve got, say, $6 billion. We’ll provide you with administration services for, say, 40 basis points.’ The dealer group goes to the market and sets a price of, say, 80 basis points. It is based on the platform administration, and the dealer group absolutely receives the revenue for that,” Shuttleworth says. “If you look at what a dealer group does, it provides compliance, constructs an approved product list, oversees practice management – dealer groups need to be profitable in order to sustain [such] an effective model of the advice business. Shuttleworth sees volume rebates as “business-to-business payments”. This grounds BT’s “absolute belief that these payments don’t create a conflict”.

But the industry fund sector also sees conflicts further down the advice chain. Chair of the $2.6 billion Media Super and president of the Australian Institute of Superannuation Trustees (AIST), Gerard Noonan, shows how the profit motives of advice businesses clash with industry super. “There are about 125,000 members in Media Super, and for the actors among them, they think a platform is something they act on. “In the area of financial advice, we have leakage at the top of our membership, usually with the high-net-worth people. And I know that none of those members has got there because a financial adviser has said: ‘You should be in Media Super because it makes a good return each year and it’s really cheap.’ Part of the solution to the industry versus retail battle, in his view, would be for more financial advisers to act in the interests of their clients. Shorten goes further, and says the Government will put a “prospective ban” on conflicted remuneration structures in the industry. He expects this to follow consultations into early 2011, the formulation of draft legislation by the middle of the year and an eventual passage of new legislation in spring.

Despite the industry’s divisions, he believes this can be achieved. For starters, Shorten, as the Minister, doesn’t concur with the vilification of the retail advice sector. “For the zealots who think that all financial planners are evil, money-sucking leeches – I don’t agree with that.” He says some volume rebate structures, while complicated, “seem to pass the smell test, while there are others that I think are opportunistic”. And his door is open to those businesses that will be negatively impacted by this change. He says the industry should evolve from here “in a way which tries to see not too many losers in the short-term”. TIME TO CONCEDE  John Brogden, CEO of the Financial Services Council (FSC), supports the pledged SG increase. At the same time, more should be done to encourage people to make additional contributions, he says. The industry must sell concessions on contributions as well as the boost to 12 per cent.

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