1. Harvey Russell Head of Advocacy Joseph Sorby Executive Manager 19 November 2014 VIEW TO THE FUTURE: THE FINANCIAL THE ADVICE EXCHANGE SYSTEM INQUIRY

2. DISCLAIMER This presentation is given by a representative of Colonial First State Investments Limited AFS Licence 232468, ABN 98 002 348 352 (Colonial First State). Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of interests in FirstChoice Personal Super, FirstChoice Wholesale Personal Super, FirstChoice Pension, FirstChoice Wholesale Pension and FirstChoice Employer Super from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and interests in the Rollover & Superannuation Fund and the Personal Pension Plan from the Colonial First State Rollover & Superannuation Fund ABN 88 854 638 840 and interests in the Colonial First State Pooled Superannuation Trust ABN 51 982 884 624. The presenter does not receive specific payments or commissions for any advice given in this presentation. The presenter, other employees and directors of Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for investments in its products. For further detail please read our Financial Services Guide (FSG) available at colonialfirststate.com.au or by contacting our Investor Service Centre on 13 13 36. All products are issued by Colonial First State Investments Limited. Product Disclosure Statements (PDSs) describing the products are available from Colonial First State. The relevant PDS should be considered before making a decision about any product. Stocks referred to in this presentation are not a recommendation of any securities. The information is taken from sources which are believed to be accurate but Colonial First State accepts no liability of any kind to any person who relies on the information contained in the presentation. This presentation is for adviser training purposes only and must not be made available to any client. This presentation cannot be used or copied in whole or part without our express written consent. © Colonial First State Investments Limited 2014.

3. THE NEW NORMAL

4. THE LANDSCAPE POLICY AND REGULATORY CHANGE IS NORMAL 201420152016 Sept 2014 FOFA Senate Inquiry: Report due Sept 2014 PJC advice standards: Submissions due Nov 2014 FSI: Final Report Dec 2014 Scrutiny of advice Senate Inquiry: Submission due Late 2014 Tax White Paper Terms of reference released Early 2015 FSI: Govt response July 2015 Scrutiny of advice Senate Inquiry: Report due Late 2015 Tax White Paper Report Likely 2015-16 FSI: Introduce legislation 2016 Federal Election likely to be held Advice Parliamentary Inquiry Sept 2014 Income stream consultation: Submissions due Late 2014 Welfare Review: Report due Early 2015 Stronger Super: Reforms finalised Late 2014 Stronger Super: Consultation commence Mid 2015 Stronger Super: Reforms commenced Financial System Inquiry Stronger Super Tax White Paper Retirement Policy Other Oct 2014 Govt response to Senate Inquiry into ASIC

5. INDUSTRY UNDER PRESSURE

6. FINANCIAL ADVICE CONTINUED SCRUTINY & REFORM Reform ! Streamlining FOFA legislation Remove opt-in, best-interests catch-all & retrospective FDS Palmer United Party disclosure changes Performance of ASIC Public register of all financial advisers Office of the Whistle-blower No CBA Royal Commission Professional, ethical and education standards Increased education standards, including possibility of Independent Board Scrutiny of financial advice Broad scope, including consumer protection, conduct and Regulator powers Parliamentary Inquiry

7. WHY FSI?

8. WHY DO WE NEED ANOTHER FSI? Capital allocation and economic implications Super became a key focus It’s been almost 20 years since Wallis

9. SUPERANNUATION FOCUS Superannuation assets are now over $1.8 trillion* - around six times their level since the last Financial System Inquiry in 1997 Can superannuation be a greater source of funding for the economy, including banks? 1997 x6 *As at the end of the June 2014 quarter. Australian Government - Australian Prudential Regulation Authority (2014) Statistics: Quarterly Superannuation Performance (June 2014 interim edition issued on 21 August 2014).

10. FSI TIMELINE Aug 2014 Nov 2014 Jul 2014 Mar 2014 Dec 2013 Initial submissions to the Inquiry 1 Second round submissions to the Inquiry 2 Interim reportFinal report from the FSI Committee due to Treasurer Financial System Inquiry terms of reference announced

11. FSI WEALTH IMPLICATIONS

12. POST-RETIREMENT KEY OBSERVATIONS AND IMPLICATIONS Interim Report

13. POST-RETIREMENT Implications ! Regulatory incentives to encourage the development and take up of income streams Greater variety and demand for income stream products Defaulting into income streams – MyPension? Depending on income stream proposed, may impact level of voluntary contributions to super. Practical difficulties with defaulting. Compulsory income streams May reduce demand for advice in pre and post- retirement Government-issued retirement income product May crowd out the private sector and associated innovation Restrict / tax lump sum withdrawals above a certain threshold Issue likely to be deferred however lump sum taxes may impact voluntary contributions and trust Observations or policy options

14. CONSUMER OUTCOMES KEY OBSERVATIONS AND IMPLICATIONS Interim Report

15. CONSUMER OUTCOMES Implications ! Raise minimum education and competency standards Move towards a profession and greater integrity Enhanced public register of financial advisers Greater consumer visibility and the chance for advisers to differentiate based on their credentials Renaming general advice as product or sales information Greater consumer clarity Clearer distinction between aligned and independent advisers Greater consumer understanding. Advantages for both models. Enhancing consumer access to effective, low-cost advice Facilitate greater use of technology in delivery of advice and disclosure Enhance ASIC’s powersGreater intervention powers Observations or policy options

16. SUPERANNUATION SYSTEM: KEY OBSERVATIONS AND IMPLICATIONS EFFICIENCY AND POLICY SETTINGS Interim Report

17. SUPERANNUATION SYSTEM: EFFICIENCY AND POLICY SETTINGS Observations or policy optionsImplications ! Super fees are too high when compared internationally FOFA and Stronger Super and increased fund consolidation will continue to place downward pressure on fees. Auction system for fund selection? Ban on direct leverage in super and concerns around SMSF operating cost levels Some members may reconsider direct property. Need for greater trustee education or financial advice. Is vertical integration reducing competitive pressures and increasing super fees? Are the benefits flowing through to consumers? Possibility of greater distinction between independent and aligned advisers Is there an undue short term focus in superannuation and a move to passive investment management? Move to more homogenous product design, restrictions on asset transfers (extend portability timeframes)? Statutory compensation scheme Increase moral hazard and impact PI insurance.

18. REGULATOR’S FUNCTIONS & KEY OBSERVATIONS AND IMPLICATIONS CONSUMER PROTECTIONS Interim Report

19. REGULATOR’S FUNCTIONS AND CONSUMER PROTECTIONS Observations or policy optionsImplications ! Industry-funding model for ASIC May result in higher levies, particularly for ‘higher risk’ entities and individuals Subject product issuers to a range of product design (suitability) requirements May reduce product innovation given limitation on features and design Refine the scope of ASIC’s mandate and increase coordination via CoFR Greater transparency on Regulator activities and decision making Remove disclosure requirements that have proven ineffective and facilitate new ways of providing information to consumers Increase consumer engagement and literacy Accelerate competition between product providers

20. WHAT’S NEXT?

21. CONCLUSION Regulatory change is now business as usual FSI will have a considerable focus on wealth management given the growth of superannuation IFAs are well positioned

22. THANK YOU