Super man scores one for the battlers
David Whiteley is holding out an olive branch to financial planners after reforms of their industry became law this week, writes Annette Sampson.
David Whiteley is holding out an olive branch to financial planners after reforms of their industry became law this week, writes Annette Sampson. Listen to many financial planners and you could be forgiven for seeing David Whiteley as the devil incarnate - the evil puppetmaster pulling the strings of government to destroy their livelihoods and industry.But while adamant that consumers deserve better, the chief executive of the Industry Super Network has more than a degree of sympathy for financial advisers anxious about change."My father was a union official in England and he worked in the finance sector," he says. "He did a lot of work with financial planners during [that country's] mis-selling scandal. I learned that these weren't necessarily bad people. They were ordinary people just doing their job and being given an incentive to sell."Whiteley has long advocated reforming financial planning, arguing the old commission-based system of pushing product had conflicts and was against the interests of consumers. ISN, which represents many of the biggest not-for-profit super funds, has been a driving force behind the government's Future of Financial Advice Reforms, which were passed by Parliament this week.The reforms, and complementary legislation which will provide consumers with a simple, cheap default superannuation fund, have resulted in differences within the financial services industry at times reaching fever pitch. But Whiteley says industry funds have been prepared to compromise, and shown by their support of a last-minute amendment which will exempt financial planners from the controversial opt-in provisions if they sign up to an approved code of conduct."This [legislation] is going to be a transformation for the finance sector and it will be a very different way of life for many financial planners," he says. "We always realised that change would take time."Born in Sheffield in the north of England, Whiteley spent his early post-school years working for the Prudential insurance company dealing with commercial and home loans."At the time England was in recession and had high interest rates," he says. "There were a lot of repossessions and the work often involved helping people to restructure their affairs after losing their jobs."On a working holiday to Australia he met the woman he was to marry and the rest, as they say, is history."We returned to England so I could finish my degree," he says. "It rained every day. We came back."Whiteley went on to do a masters degree at the University of Melbourne before joining the ACTU in its member services division. Part of his work involved working on ACTU super policy, so moving to ISN seemed a natural transition.What started as a role centred on joint marketing and similar initiatives has led to a strong involvement in policy development and championing the industry fund cause."Compulsory super is a very privileged industry in which to work because it is mandated to grow," he says. "Especially in industry funds there's a feeling that it's a genuine privilege to be working in the industry and it's doing more than providing a financial service."In 1996, when Whiteley joined ISN, a $3 billion super fund was massive. Today leading industry super funds manage more than 10 times that and collectively funds control more than $240 billion. Industry funds have become heavyweights controlling significant public infrastructure assets as well as more traditional investments such as shares and CBD buildings.They also have political clout. Last year, the Prime Minister, Julia Gillard, infuriated the conspiracy theorists when she addressed an ISN lunch and lauded their support in reforming the industry.ISN, she said, had stood with the government on its reform agenda and was often at the vanguard of policy debate.Whiteley is unapologetic."Industry funds have done a huge amount of research and policy work on what the system should look like," he says. "At one point that attracted a lot of criticism ... People said it was a waste of money. But our view is you have to respond to the policymaking process and demonstrate your case. The alternative is to randomly shout out guidelines, but we have gone about it in a methodical way."The role of unions in industry funds is inevitably a target for critics who see them as "union controlled" or caught up in a union grab for power. But this overlooks key components of the super legislation. While unions might have representatives on trustee boards, funds are required to have equal union/employer representation. And all votes require a two-thirds majority to be passed."The term [union controlled] is designed to be pejorative and has been used for 25 years," Whitely says. "But the fact is they are run by both union and employer representatives and the employer representatives are as intimately involved as the union advocates."For Whiteley it is more about history than ideology. He says industry funds, products of the wage accord negotiated under the Hawke/Keating government, tend to see issues from a public policy perspective. On compulsory super, their view is that if 80 per cent of members do not actively choose where their money is invested, or engage with their funds, protections must be put in place.He says the financial services industry, on the other hand, is used to dealing with products over which customers do take active decisions - credit cards, mortgages, savings accounts and so on. So to them the central issue is individual choice and responsibility.Whiteley believes the differences are often overblown. He says both the Financial Planning Association and the Financial Services Council (which represents the big retail funds) had long accepted that commissions have to go and that financial advisers should act in their clients' best interest.With all three groups represented on the current "round table" convened by the Superannuation Minister, Bill Shorten, to discuss further reforms to the system, Whiteley says the more extreme views are likely to come from outside players than other parts of the industry."The round table is evidence of how the industry can work together constructively," he says. "Most have been working together through the MySuper and FOFA reforms and by and large there is general agreement on the main issues to be addressed."Whiteley says key issues for the group are income options for people in retirement, which need to be more flexible, and the equity of super tax concessions."The challenge there is that the government has a limited amount to fund tax concessions and we need to ensure lower earners get their fair share. But you have to recognise we still have a lot of people in their 50s who may not have saved enough and want those concessions. That could mean less drain on the tax system in the future but there is a limited amount of money available."Similarly, while debate will inevitably continue over the finer detail of implementing the FOFA and MySuper reforms, Whiteley is keen to move on. He wants the industry to "stop sniping at marginal issues" and address the major challenge of addressing the "sustainability of the system and the mechanisms by which it can deliver on its promises".He says the industry needs to think through the sustained period of negative returns caused by the global financial crisis and come up with ways to build genuine confidence.Whiteley says he has never lost his "sense of wonder" at Australia's super system. "It is genuinely one of the achievements of Australia," he says. "We didn't have it in England and other countries regularly look at it as a role model. We now have the opportunity to make it beyond doubt the best system in the world and to fireproof it from periods of negative returns."