Ann: Investor presentation - IOOF FY 2018 results, page-78

"Given the inordinate amount of money being spent on the RC, we can be fairly assured there will be recommendations.
On a probability level, what chance do you (or others) ascribe to a meaningful change in legislation which would have a significant effect on IOOFs business model such as abolishment of vertical integration, and the need to separate advice and platform.
Can you see more likely ‘targets’ for the rc recommendations, that will ‘justify’ Haynes time and our money?"

@Just_a_guy ,

I think there are a number of RC outcomes that I think will be near-certainties:

1. A beefing up of ASIC resources (I see the government has already commenced pre-empting this by increases state funding for ASIC);

2. Enhanced reporting (not just breach reporting, but other routine reports as well) protocols from industry participants and various Regulators, and even greater powers of Regulators to access information is required;

3. Greater financial penalties for both companies/trustees/RE entities and for directors of each of these; and

4. Legislation targeted specifically at compulsory intra-company separation of duties where conflicts of interests are deemed (by the Regulators and not by the companies) to exist.


It warrants remembering that one of the strongest forces that has driven the industry - with multi-partisan support, but particularly by the super funds and their gatekeepers to evolve to its current form is that of- a desire to reduce the costs of the management and administration of peoples' wealth. (The post-GFC period of muted investment returns has amplified this drive.)

So when whatever legislation gets contemplated as a result of the Commission's recommendations, the submissions to be made from the wealth management industry - especially the representatives of super-annuants, namely the powerful superfunds - are sure to be remonstrating against any major tectonic shifts in the system, which will have the affect of arresting the structural decline in fees to its members.

Which is why I think wholesale structural separation is unlikely; because it de-scales the industry and adds layers of dis-aggregation costs.

There is always a trade-off between precision and expense.

And to eliminate the more egregious examples of imprecision does not require the very expensive requirement for the entire wealth management industry to be taken back to first principles.


So, this is not to say, there won't be changes; there will most certainly be. But I strongly suspect the changes that will be made will not be made by starting the entire industry from a clean slate, but will be made withing existing entities.

Which I, as a shareholder in a business who doesn't like seeing my business having shortcomings and not operating at best practice, think is a good thing, and why I - probably unlike most investors - am actually a supporter of this Royal Commission. Because it will improve the calibre of the companies I like to own (and, ironically, raise the barriers to entry for potential new entrants).