Big In Our Own Backyard

Prime Minister Kevin Rudd has been very active since steering the Labor party to victory in last year’s Federal election having won over voters with his offer of a refreshing new direction for the country.

In the nine or so months since, Rudd has been projecting a proactive and engaging image of himself and his party by rolling up his sleeves both here and overseas and vocally seeking to tackle the major issues facing the nation.

The 2020 summit, hard talk on climate change, an education revolution, a major national health and hospitals reform plan, befriending of our Asian neighbours (particularly China) and now flying the flag for financial services – Kevin has been a busy boy indeed.

It was flattering therefore that just over a week ago an energetic Rudd found the time to speak at a financial services summit in Sydney, where he reiterated the Government’s pledge in promoting the industry as a ‘hub’ for the region.

This was welcome news for many, however without wanting to dampen the spirit of all concerned – news that is far from new.

There have been 20 or 30-odd years of sporadic initiatives by various Federal Governments to push Australia as a funds management and financial services hub for the Asia region.

However there is a chasm of difference between wanting something to happen and something actually happening.

For the country to actually achieve what Mr. Rudd and the many senior executives who attended the summit want, the establishment of a task force is only one tiny step (albeit a positive one) in the right direction.

Without wanting to be seen as a naysayer, the three Labor moves that Mr. Rudd emphasised as indication of the seriousness of his intent are unlikely to deliver Australia the competitive advantage that would make investors, institutional or otherwise, more inclined to look at Australia.

Slashing withholding tax rates for established real estate investment trusts from 30 per cent to a final rate of 7.5 per cent by 2010-11 and moving towards the national regulation of credit products through the COAG Business Deregulation and Competition Working Group, are not a competitive advantage but merely make Australia less unattractive than it currently is.

Dubai and Shanghai are both earmarked as two of the next major financial global market pivots, and both of these have favourable low tax or tax free incentives to entice fund flows either to them or through them. Australia, for the most part, has an unfavourable tax regime and state governments that can’t see past their own needs.

A hub implies one central point through which something passes – can this be Australia as a whole, when within it Sydney, Melbourne, Brisbane and Perth are all under separate jurisdictions?

All this aside, it’s unlikely that financial advisers are following the global hub seed project as closely as they’re tracking the utterances of one of Mr. Rudd’s offsiders – Minister for Superannuation and Corporate Law, Nick Sherry.

Since following Mr.Rudd’s strategy of open-consultation Senator Sherry has instigated more than a dozen reviews into the machinations of the financial services industry – and some of these have financial planners nervous.

This has set many advisers into panic mode, particularly in relation to a feared crackdown on how payments are made and disclosed.

It’s almost a given that change is coming, but exactly what shape it will take exactly is unsettling many in the planning industry far beyond anything happening in investment markets.

Many advisers are keen to be accepted as true professionals, alongside other well established professions, and for this to happen most would agree that change is required.

Pure fee for service is not the solution for the majority of planning businesses out there but neither is continuing to ‘clip the ticket’ for providing no ongoing service, in some cases for clients who have long become ex-clients.

Yes, trail commissions are inherently bad, if consumers are unable to ‘switch them off’ and advisers do not provide any service to clients in order to receive them.

However the last thing the industry should do (although it already appears to be doing just that) is turn on itself.

Senator Sherry and co face a hard task, as there are so many camps pushing their interpretation of to how the New World Order should appear, however a small dose of pragmatism is required because if we can’t get our own house in order, how are we going to sell ourselves as a bastion of financial services globally?

This article appears in the latest edition of IFA Magazine