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Repeat after me
BY ALEX DUNNIN | FRIDAY, 22 JUN 2018   3:17PM

Everyone repeat after me: the Productivity Commission report is just a draft, it is not government policy and it will be a long while before the Federal Government responds let alone announces any legislation changes.

Unnecessary to say this? Why then are so many people carrying on as if the recommendations are set to be implemented Tuesday next week?

Surely by now after so many inquiries and reports they would have learned how all this works.

Nevertheless if you are one of these excitable folks, take a chill pill and calm down. The Government isn't going to do anything with the PC report until the financial services Royal Commission wraps up and the RC hasn't even broken into its stride yet - and anyone who thinks it will wrap up next year isn't paying attention.

Commissioner Kenneth Hayne will be given as much time as he wants because no government will be crazy brave enough to tell him to shut down until he's good and ready. In this way the RC is more like a Truth and Reconciliation Commission.

Hopefully it won't need a national apology by a future Prime Minister but in this mad, zany political world only a fool would rule that out.

Returning to the PCs draft report, sure it jumped the shark with its 'best in show' beauty parade idea, which is why that recommendation is unlikely to go anywhere, but to obsess with that is to miss the play.

This is because the core problem identified by the PC is the market failure that enables chronically underperforming superannuation funds and products to stay in business, that people have too many superannuation accounts, and that young members' accounts are being drained to subsidise insurance premiums for older people.

As a result, if you don't like the 'best in show' proposal, and you have a better way to fix the problem of people joining dud funds, now would be a good time to share your thoughts.

The PC meanwhile had some surprisingly harsh things to say about the government's planned MyRetirement initiative, lifecycle products, the chronic under performance of sub $1 million SMSFs that hold most of that sector's members, governance and regulation.

For the record however I absolutely love the Productivity Commission draft report. Love it. I love it because it's like NAPLAN for superannuation.

What makes NAPLAN so magical is not so much the individual school results but the way people react to them - ranging from calmly rational all the way through to the surreal, ideological, emotional and positively bizarre.

Extending the analogy, smart use of the NAPLAN results doesn't just enable us to identify which schools and education systems are failing their students. It enables educators to see which are adding the most value and improving them by the biggest margins (by the way it's the Tasmanian education system).

Indeed this may be why the PC draft report is so confronting - it drills deep into superannuation's dark abysses that we didn't want outsiders to see.

Which is probably why the report triggered such broad media coverage - it gave voice to many of the frustrations lots of people seem to have with their super funds. And when the best funds and products consistently outperform the worst ones by ratios of three-to-one with regulatory impunity it's not hard to see why.

As a result, it would be naive to dismiss this draft report as just another report from yet another inquiry. Moreover the stakes might be higher than we thought because we are already seeing news and opinion articles appear in the mainstream media challenging the fundamental concept of compulsory superannuation.

Don't forget that just as compulsory superannuation began with the legislative stroke of a pen it can be ended the same way; notwithstanding just as we shouldn't overreact to the PC's draft report we shouldn't underreact either.

Reflecting all this, the superannuation sector should embrace the PC's draft report, and the RC for that matter, as a gift opportunity to fix big problems dogging superannuation and financial advice and to finally get the market working.

This is probably why so many wealth groups are actively restructuring already. They know where this is heading and want to be on the right side of history.

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