Jane Hume: 00:00 The financial system is such an important part of the Australian economy. It really is an arterial vein. And a well functioning financial system means a well functioning economy and Australia does have a financial system that is enviable. It has been unquestionably strong. In fact, it’s been so unquestionably strong, we think that that was what brought us through the global financial crisis. Less ... I wouldn’t say unscathed, but I suppose less damaged than so many other economies. But it’s not a perfect system. We’ve looked at strength, but I think that the Hayne Royal Commission demonstrated that while you can have unquestionably strong financial institutions, conduct is also important as well, and compliance.
Intro: 00:38 This episode was recorded live at United, the 2019 AFA Conference in Adelaide. The Association of Financial Advisors is the association of choice for financial advice professionals, and empowers them to transform the lives of Australians through quality financial advice. For more information, check out afa.asn.au.
Fraser Jack: 01:00 Welcome to the Goals Base Advice podcast, where we have conversations with pioneers of the new world of financial advice. I’m your host, Fraser Jack, I want to thank you so much for tuning in today. Coming at you live from the Association of Financial Advisors Conference here in the amazing city of Adelaide. And I’m very lucky to be joined by the assistant minister of financial services, superannuation and financial technology, senator Jane Hume.
Jane Hume: 01:27 Great to be with you Fraser. It’s a terrible acronym, isn’t it?
Fraser Jack: 01:31 I haven’t put it together an acronym, but I’m going to have to do that now. It’s a long title though.
Jane Hume: 01:35 It is a very long title. Well it’s a big job and there’s an awful lot to do.
Fraser Jack: 01:38 So how did you come about to your journey for this big job?
Jane Hume: 01:42 Well actually I came from this industry. When I finished my degree, I got my first job, but my second and third jobs were both in National Australia Bank and working with financial advisors back in the ... This is the mid 1990s, working at that stage with NAFM, National Australia Financial Management. And then as the financial advice group got brought into the bank proper working with them. And my first real job was as the investment manager, which my job was to put together the approved product list for the financial advice group, for National Australia Bank. Back in the days when a 26 year old girl with a commerce degree and nothing but a ponytail and a dream was compliant enough to be able to put together a whole approved product list for a dealer group.
Fraser Jack: 02:27 So you were researching all those?
Jane Hume: 02:29 I was, I was researching all the alternative products that the National Bank advisors could recommend. So that was a big job. I then went on to work at Rothschilds in business development. Later on at Deutsche Bank. And then my last job before I was elected to the Senate, was at Australian Super as their senior policy advisor, which is an interesting journey I think for a liberal politician to come from industry Super. But it was fascinating and really eyeopening. So I’ve been immersed in different parts of this industry. It’s an industry that I’m really passionate about, and I love, and I want to see grow and expand, because it really does add so much value.
Fraser Jack: 03:08 Yeah. Now you’ve come from just exploring that journey, obviously a lot of history there with financial services. A lot of it also in large institutional businesses or corporate businesses. Any in the small business?
Jane Hume: 03:21 Actually my first job out of university was working for my dad, a family business. He was a broken, not a stockbroker perse, but a private company broker, who would take family businesses that, normally it was the dad ran it and he had two idiot sons that wanted to become professional surfers or underwater basket weavers, and they wanted to sell the business. So they would approach Dad. He would do valuation, a significant valuation, and then we would find potential buyers and introduce them, and broker the deal. So I worked with him as an analyst and did those business valuations and got to meet a lot of those small business owners myself, or family business owners myself. As well as working in one that I had a vested interest in, and that was my family business.
Fraser Jack: 03:21 So a lot of empathy there for small business?
Jane Hume: 04:10 Yeah, that’s right. But it also taught me a lot about valuations, what a profitable business looks like, and what it is that keeps business owners awake at night too.
Fraser Jack: 04:21 Yeah, there’s a lot of conversation going on with valuations at the moment in the financial services industry, and valuations have been falling over a period of time, and a lot of small business owners have been suffering from that valuation.
Jane Hume: 04:33 Yeah. Well we got to admire small business owners and family businesses. They take a risk, they employ other people and they do lie awake at night, making sure that their cashflow is working and making sure that they can pay those people, that they can grow their business and expand. It’s really exciting to meet people that have taken that risk and made that step.
Fraser Jack: 04:52 You’ve obviously just come off stage and made a few announcements. Do you want to give the listeners a bit of an overview of what the announcements were that you’ve made, and the conversations that we’ve just had on stage, and some of the things that government are doing right now?
Jane Hume: 05:03 Yeah, certainly. So obviously the financial system is such an important part of the Australian economy. It really is an arterial vein, and a well functioning financial system means a well functioning economy. And Australia does have a financial system that is enviable. It has been unquestionably strong. In fact, it’s been so unquestionably strong, we think that that was what brought us through the global financial crisis. Less, I wouldn’t say unscathed, but I suppose less damaged than so many other economies. But it’s not a perfect system. We’ve looked at strength, but I think that the Hayne Royal Commission demonstrated that while you can have unquestionably strong financial institutions, conduct is also important as well and compliance. So obviously Commission Hayne made 76 recommendations, the government. As did the opposition to be fair. The government committed to acting on all 76 of those recommendations. The Treasurer, Josh Frydenberg announced just last week that he released a roadmap of how the government would implement those recommendations.
A number of them require legislation, I think over 40 of them. But we are committed to making sure that all of those recommendations are addressed and implemented within the next 18 months, and there is at least legislation before parliament. We understand that that’s a really tight timeframe, and it certainly is going to take up an awful lot of the legislative agenda. The treasury portfolio is already around a quarter of everything that the parliament does. And this will take up about 75% of that quarter. And of course then we’ve got budget legislation that comes through as well. And that takes up a fair bit more. So it will be really tight. But we believe that there is a collective goodwill to see an increase in the professionalization of this industry, that the recommendations that Hayne has made are fair and reasonable and. And that we also think that there is bipartisan support for a lot of the things that we intend to do. So we shouldn’t necessarily have a political squabble over a lot of them.
Fraser Jack: 07:07 Yeah, it’s very unusual to have so much bipartisan support, isn’t it for such a big piece of legislation?
Jane Hume: 07:10 Well, I think that the Hayne Royal Commission’s findings, particularly some of those acts of misconduct, were genuinely confronting for, not just for consumers and observers, but for industry participants too. A lot of people in this industry really value their professionalism, and to see the behavior of a few, behavior of particular firms. That was so disappointing. It really tarnished everybody else too. So I think that there is, as I said, a collective goodwill here. We want to see our industry, the trust restored in the financial services sector.
Fraser Jack: 07:48 I just wanted to quickly talk about this timeframe of the 18 months, if that’s okay. With any legislation or big changes, there’s going to be unforeseen circumstances where we don’t know some of the outcomes that’ll take place. And some of them will be negative and some will be positive. What’s the government doing in a way, working with associations and advisors to work through those unintended consequences?
Jane Hume: 08:10 Well look, just because it is a tight timeframe doesn’t necessarily mean that we won’t be listening to the concerns of stakeholders. An awful lot of work in some of this has already been done. In fact, a number of Hayne’s recommendations reflected work that has already been done. And all you need to do is look at things like the banking executive accountability regime, which refocuses remuneration programs for bankers on having the right consumer outcomes. Expanding that to other financial services beyond the banks, is one of the recommendations. So a lot of the groundwork has already been done there. The introduction of Africa, the Australian Financial Complaints Authority, the one stop shop for financial complaints for consumers and small businesses. Again, that’s already been done. So a lot of it is building on existing work. But that said, there will still be a lot that needs to be done and we will consult widely with industry and with stakeholders to make sure that we do it properly.
We’re pretty good at this, believe it or not, we have been doing financial services reform for a considerable period of time. The coalition has a really good track record in this space. So I think that there is probably a level of trust as well, that we know what we’re doing, and that we’re all rowing in the same direction here. We want a well-functioning financial services sector in which consumers can have a great deal of trust.
Fraser Jack: 09:32 I wanted to also talk about the cost to serve and the price of financial advice as far as going to get financial advice. There’s a lot of small businesses now where the cost of licensing, professional indemnity, all of the little things that go along with providing advice, is getting to the fact where we’re pushing towards almost a $100,000 a year, for an advisor to then go out and to provide advice. And then if they can have a strong relationship with say, 100 clients, it really means that you’re looking at about $1,000 per client before they even receive advice. How do we try and get the cost of serve down?
Jane Hume: 10:16 I think there’s a number of aspects to this. The first is the government’s will, which is that we want financial advice to be extremely high quality. We want it to add value, but we also want it to be accessible, and we want it to be affordable. We know that people that do go to financial advisors, that do receive financial advice on the whole, are very pleased with the outcomes of that advice. And they feel like that they have got value for money. That said, we don’t want to push people out of the market and make them feel like financial advice isn’t accessible. The more people that get advice in our minds, the better. So we will be working with industry to try and decrease that regulatory burden, while at the same time raising the standards. It’s a balancing act. It won’t all come at once, sadly, but it’s not something that we’re unaware of. We hear about it every single day, and we want to make sure that this is a flourishing advice industry.
Fraser Jack: 11:17 Yeah, I’m certainly passionate about trying to bring advice to more people than just those that already got a lot of money to start with.
Jane Hume: 11:24 Yes, that’s exactly right. As do we. As do we. Not everybody needs the same advice. There’s different levels of advice, it’s not a one size fits all approach. But that said, we know that there is so much value in it for those that do need it, that do get it at different phases of their life cycle too. So we want to make sure that there’s the right level of advice there for everyone.
Fraser Jack: 11:46 Yeah, could I ask you, have you got a financial advisor?
Jane Hume: 11:49 I do. I do have a financial advisor. It’s funny, since I got appointed to the ministry, he’s a little bit more frightened about [inaudible 00:11:53]. And I put him through his paces. I know that we’re not supposed to have duplicate funds. I’m afraid I do. I do it entirely on purpose. I have a Choice fund and I also have an industry Super default fund. An industry Super fund. And I do that so that I can compare the performance of the two. So my financial advisor knows that I benchmark him against my industry Super growth fund. And my insurances, he has to prove that I’m getting value from my insurances, compared to the default insurance that I would get from group insurance within my industry funds.
Fraser Jack: 12:30 Yeah. Now, when you think of financial advise, do you automatically go to longterm ongoing relationship, or do you think more of a one-off service?
Jane Hume: 12:39 I think it entirely depends on the client, and it entirely depends on the circumstance. You’ll find some people that hit a milestone in their lives, whether it be having children, whether it be having a lot of debt for the first time. It might be changing jobs, whatever it might be. And sometimes the advice that they get really is circumstantial. But, I much prefer the idea of having a longer term plan, a longer term goal. I think that that’s what really creates the peace of mind that financial advice can provide. That’s where the real value is.
Fraser Jack: 13:10 Yeah, certainly a lot of the numbers and stats and the evidence gets to show that over a longer period of time, there was a lot of value in that ongoing relationship [inaudible 00:13:18]. Some music, they might be trying to wind us up the heads. Before we do though, I’d love to hear, in a few years time, there’s obviously a lot of legislation and change going on. If you look back in three years from now, what would you be most proud of?
Jane Hume: 13:35 I’d really like to see a flourishing financial advice industry, where everyone feels, to use John Howard’s words, relaxed and comfortable. But more importantly, what I’d like to see, is that trust is restored in our financial system. And that was what Hayne envisage, that’s what the Morrison Government envisages too.
Fraser Jack: 13:52 Fantastic. Senator Jane, I really appreciate you coming on the show today and having a chat to us. And I know you got a flight to catch, so thank you so much for your time.
Jane Hume: 13:59 Terrific to be with you Fraser.
Fraser Jack: 14:02 Thank you.
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