2019 ARITA National Conference: If you knew what we know

A speech by Gavin McCosker, Deputy Chief Executive, Chief Operating Officer and Registrar of Personal Property Securities, Australian Financial Securities Authority at the 2019 ARITA National Conference (Melbourne, Australia) 25 July 2019.

Let me start by acknowledging the traditional custodians the Wurundjeri-william family group and the Wurundjeri-balluk clan as part of the Kulin nation.

I must also thank Robyn for her kind introduction – and also John Winter and the team at ARITA for scheduling me in what I believe is called the ‘graveyard slot’!

Now I am hoping to keep you awake for the next few minutes, so the least I could do is start with a catchy title…

That said, this is not about sharing AFSA’s trade secrets. It’s about sharing with you what we’re seeing across the personal insolvency system – in terms of two potentially contentious issues – remuneration and culture…issues that extend beyond personal insolvency and apply to everyone here today.

I’ve chosen them because they are great examples of how we – the regulator and the regulated – can all get better at doing this... Before we get to remuneration and culture – let’s talk about this idea for a moment…

Working together for the common good

Why are we talking about this? Because it’s easy to forget how much public good we deliver by playing our roles in making the insolvency system work.

In fact, in a country like Australia, it’s easy to take for granted the fact that we have an insolvency system at all.

I think it’s valuable to reflect for a moment that, in many countries, our industry is not the norm. A couple of years ago, I had the great privilege to help implement credit infrastructure reforms in Africa for the World Bank Group. We were putting in place credit reporting, secured transactions and insolvency systems – in countries that had either never had such systems before, or needed to modernise their systems to gain the relevant economic benefits.

The World Bank is committed to building credit infrastructure because it helps to create the type of predictability that attracts local and foreign investment – vital to support developing economies.

I can only describe it as a humbling experience. I worked with many committed and wonderful people who genuinely want to improve the conditions in their own countries. The ingenuity and the positive way they approached their work, often in difficult circumstances, was awe-inspiring. At times, it was also confronting, as I saw first-hand the gulf that exists between the rich and the poor in developing countries.

In Africa, I saw the life-changing impact of having well run, robust systems that promote transparency – systems that boost economic growth by broadening of the flow of credit.

For us, having access to affordable finance – for either business or personal purposes – in a well-regulated system is a given.

This is not the case in many other countries. What I learnt during my time with the World Bank is that even the tiniest amount of credit can massively improve the plight of the very poor.

For example, without access to credit, farmers in the sub-Saharan country of Malawi have no option but to operate at a subsistence level – with terrible implications for family nutrition and local economic development. Once credit infrastructure was introduced, including a secured transactions system like the PPSR, more farmers have been able to gain access to the inputs they need to successfully harvest a crop to support their families.

At the same time, I became all too aware that, if insolvency systems don’t have the proper safeguards, this can have appalling consequences for the most vulnerable in society.

Without a personal insolvency system, people with unmanageable debts have nowhere to turn. Our industry delivers powerful social benefits, by being an important safety net for those being crushed by the burden of debt.

After Africa, I came back to AFSA with a broader perspective. My greatest take away is that we should never take for granted the fact that debtors and creditors have enforceable rights under the law here in Australia. And that the systems upholding those rights deliver public goods – in the form of incredibly important social and economic benefits.

The reason I wanted to speak to you today is that, relatively uniquely…together, AFSA and practitioners are the means through which those public goods are delivered.

If we look at the system through this lens, it makes sense for you to ‘know what we know’, because your interests and AFSA’s interests are aligned:

  • AFSA wants to ensure the personal insolvency system operates in a manner that is – and is seen to be – even handed
  • For practitioners, it makes good, long-term business sense to operate in a way that supports a high level of trust and confidence in your practices and behaviour.

Looking at this from AFSA’s perspective, our role is to maintain a ‘balanced’ personal insolvency system.

In any system there are a range of competing interests and at times, agendas. The role of a regulator is to work to support compliance in an even-handed manner that strikes the right balance between those competing interests.

Too much emphasis on one area over another will inevitably raise concerns about fairness – although of course this won’t generally come from the group that has benefited from the lack of scrutiny!

Similarly, practitioners have to strike a difficult balance. The fact is, when it comes to creditors and debtors in the insolvency system, there are often no winners. Instead, we expect practitioners to strike a compromised position within the legal framework.

This is why – when I look at the skill set of highly effective practitioners (many of whom are in this room) – the secret ingredient appears to be excellent diplomacy skills combined with judgement orientation – putting a ‘fairness’ lens over a commercially sound decision-making process.

We are all in the business of balancing fairness.

Now if you accept we are all in the business of fairness, the logical next step is to ask yourself ‘who assesses if something is fair?’.

To determine whether the personal insolvency system is ‘fair’, let’s defer to the advice of Professor Mark Moore from Harvard, the author of Recognising Public Value, who says this:

“What makes social outcomes valuable is not simply that particular individuals value them, but that the wider ‘public’ has tacitly agreed to be taxed and regulated to produce the desired social result that values them.”

In other words, the system must deliver an outcome that the collective public values… even if the outcome is not valued by the people who consume our services.

Which begs the question: ‘How does the general public assess fairness in the insolvency system?’

Take a moment and think about that. Talk to people near you.

What are some of the aspects of the personal insolvency system that the general public want us – as a collective – to get right? As insolvency practitioners – personal or corporate, I’m sure you’ll have an informed view on this.

I’ll give you a moment to talk to people near you…………..thank you.

  • Raise your hand if someone said if it depends on whether they are debtors or creditors…
  • Raise your hand if someone mentioned equal treatment among creditors…
  • Raise your hand if someone mentioned remuneration…

In fact, AFSA’s research shows that remuneration is a key factor in whether the system is perceived to be fair.


As a regulator, AFSA maintains a close interest in remuneration. As the results show, it’s one of those areas that, if not appropriately supervised, has the potential to undermine perceptions of fairness.

We also know that, for practitioners, it has the potential to impact the confidence of creditors in the outcomes the insolvency system can deliver, as well as undermining the efficient interaction between creditors and practitioners.

So, remuneration is an area where I believe the interests of the regulator and practitioners align, as there is no long-term benefit for any profession to be viewed as one that charges more than is necessary.

However, we are also aware that practitioners are in a particularly challenging situation when it comes to remuneration.

When people are paying for a service they don’t really understand – and don’t see the work that goes on behind the scenes – it’s hard to appreciate why something costs so much.

This point can be applied across all the professions. Certainly, the debate has recently begun in the area of financial advice.

Consumers rarely consider the significant time and investment taken for any professional to complete their qualifications or to develop the skills they need to competently do their job.

But the personal insolvency system, has additional challenges:

  1. The nature of outcomes – if no one wins people are unlikely to recognise the value being delivered by the practitioner.
  2. The difficulty of comparing fees – The less choice and the more scarce the information about comparative fees -- the harder it is for a service user to determine whether they have received value for money. In an AFSA survey, one of the reasons creditors gave for failing to approve remuneration – or abstaining from the process altogether – was that they didn’t have a benchmark against which to judge whether fees were warranted.
  3. The type of service – This effect is further amplified when the service being received is not one that someone would generally go out and enthusiastically shop for.

And herein lies the issue when we think about the topic of remuneration in the personal insolvency system.

We have a system that, on the one hand, requires highly skilled practitioners to exercise their skills in a manner that complies with their obligations at law – in effect, as an officer of the court. And it’s only reasonable that they receive a proper return from applying their considerable expertise.

On the other hand, we have creditors (the people with the primary power to approve practitioner remuneration) either failing to approve remuneration or, more commonly, failing to engage in the process of setting fair fees.

It’s a global issue – and one that creates an unfortunate self-reinforcing cycle where practitioners get limited feedback from creditors to inform the choices they make, while creditors are disengaged with the process, sometimes because they don’t believe they will get a good return on their investment of time in getting involved with the process.

Part of the problem is – and I’m sure you’ll be shocked to hear this – like many consumers, creditors don’t always behave rationally.

We know from talking to and surveying creditors that they will often base their choices on considerations that are not necessarily focused on what benefits them in the long run. For example, creditors have told us that, in the context of debt agreements, they will use their voting rights to avoid being seen as the one holding up the process to the detriment of the debtor – even if they believe it may not be in the best interests of the debtor.

Now, obviously, this is not the case in every situation. However, there is enough of this self-reinforcing cycle to influence perceptions around remuneration.

I believe it’s in both our interests to correct that perception.

We need to work together to ensure a balance between a sustainable industry supported by public confidence – one where practitioners receive an appropriate level of remuneration and where ‘consumers’ of the services perceive they are receiving value for money.

What can you as practitioners do?

  • Keep working to put the right information in front of creditors.
  • Make sure that information clearly sets out the costs and implications of the decision they make as creditors.
  • Maintain close engagement with creditors and explain the rationale for doing different types of work and keep creditors informed of progress and likely cost.

In short, do whatever is in your control to ensure creditors are well positioned to make informed decisions.

What is AFSA doing?

Well, we don’t see it solely as a practitioner problem. We are concerned about creditor passivity and see that they have an important role in breaking the cycle.

For that reason, we are meeting with key creditor groups and promoting with them our expectations of the role they should be playing within the system. Some of you may have seen our public messages on that topic over the last few months.

Further, we are currently pulling together the different information we have available to us through inspections and remuneration reviews – including both complaints driven and IG own initiative reviews. We’re also going to include some anonymised findings of the complaints we investigate and the data we analyse to articulate what we see as best practice principles around remuneration.

We’ll be socialising this in what is a first – an Inspector-General’s remuneration report – over the next couple of months. We hope to use that piece of work to provide further guidance in the challenging area and to support the profession to weed out sub-standard behaviour on the fringes of the system.

Culture and diversity

Finally, on to culture – something that we all need to work on if we are to deliver the public good that our industry provides

Now, we’ve just seen a big focus on the influence of culture and behaviour in the financial services sector. It’s a good case study of how you can end up in a bad place when there is incremental implied or passive acceptance of poor conduct and behaviour.

I’m not suggesting there’s a systemic cultural issue among registered practitioners. But what I can tell you is what we know. We know, through our inspection work, that a number of workplaces in the profession are still quite ‘blokey’, and this might not be a comfortable fit for many people, including your clients.

Against this background, I am suggesting that all professions, and regulators, should regularly check their culture to ensure its keeping pace with the ever-changing expectations of our community.

And one of the most important ways of doing that is to improve diversity. Because, without diversity, you can end up with homogenous cultures that are out of step with the world at large.

At AFSA, our interest in the benefits of diversity is about ensuring we not only regulate the right things in the right way, but also in how we can improve the way services are delivered – by us and by practitioners.

If we’re trying to deliver a public good, we need a workforce that reflects and understands the people we are serving.

For example, according to the last Australian census, 49% of Australians were either born overseas or have at least one parent born overseas. Now, from my work with the World Bank, I know that many people born overseas are used to very different legal and institutional frameworks than the ones we have in Australia.

Knowing the general principle that most people want to willingly comply – how then do we balance and simplify compliance for all people from all backgrounds – while ensuring we direct resources to those who intentionally misuse the system – and towards supporting the most vulnerable?

So, what else do we know?

We know that the majority of financial counsellors throughout Australia are women. We also know that debtors who reach out to AFSA when considering their options including insolvency, are more likely to speak to a woman.

Yet, if they decide to enter insolvency, they have a 90% chance of being appointed to a male trustee. As key stakeholders in the personal insolvency system, we all need to consider the potential impact of this situation?

Now I’m not standing here holding up AFSA as a poster-child for diversity.


As you can see, we have a gender imbalance at the senior levels in AFSA. While 60% of staff are women, when you look at the leadership team, the percentage drops to 44%, with female participation at the most senior ranks being only 13%.

And gender is only one vector of diversity. So, we also need to do more to get more diversity across disability, age, ethnicity and sexual orientation in the profession.

This is one reason why we are continuing to work with organisations like ASIC and ARITA to address diversity across the industry.

I am proud to be AFSA’s board champion for our LGBTQI+ network. Having spent 3 years living in the Torres Strait, having experience caring for someone with a mental health disorder and having experience with the World Bank in Africa, I am trying to be more of a diversity champion and model my own leadership to support diversity in our organisation – not only with the objective of leading an accepting and supportive workplace for all, but also with the objective of enriching our perspective as a regulator – and to influence our regulatory practices.

From my own perspective, I’ve seen the diversity issue from both sides of the fence.

At the age of just 21, I was put into a management position in a British transport and logistics company. You can imagine how delighted the, middle-aged, English transport workers were to receive instructions from a young Australian.

Fast forward a few years when I was a manager in a bank, I had women and parents in my team for the first time. I thought I was pretty open and a decent, respectful and empathetic manager.

Then my wife and I were lucky enough to have a child of our own – and I realised I hadn’t had a clue about the reality of balancing small children with work.

The point here is that you learn – and you need to always be open to learning and considering your beliefs from other perspectives. I have long been an advocate of diversity, but, as I was not one of the impacted or marginalised, I thought I was an imposter in diversity conversations.

I thought: “How can I advocate for, or represent these groups in the right way when I don’t have their experience – and likely never will?”

Then, several years ago, some former female colleagues told me horror stories about how they’d been treated at work – and I ended up reading this book by Catherine Fox.


I now think it should be mandatory reading for 3rd year university and VET students – women and men alike. In her investigation of common misconceptions that stop women being appointed into senior positions, Fox starts with the insidious myth that workplaces are meritocracies with an "even playing field" and those with top jobs are "simply better equipped."

In reality, studies show that women are paid less than men, are underrepresented in accelerated development programs, and discriminated against at all levels.

And, as I’ve pointed out, gender is just one vector of diversity.

We all need to play our part in opening up our organisations to all its other aspects as well. By openly supporting and discussing diversity here I am trying to do my small part in furthering this conversation.

Of course – we all know cultural change won’t be easy. It will require a level of adjustment – and a willingness to experience a level of discomfort by considering perspectives on things you didn’t previously believe needed fixing.

If you genuinely commit to building a diverse culture that is able to reflect and challenge itself, there is enough evidence to show, the dividend will be long-term success.

Otherwise, there’s real risk of waking up one day and finding that the gulf between where you are as a profession and where the expectations of the general community are – is simply too wide to bridge.


In closing, let me leave you with one final observation about why it’s important to both regulators and the regulated to spend a bit of time understanding each other’s perspectives.

When it comes to regulation, the world has moved on. The traditional master-servant compliance-based regulatory models are not keeping pace with what all of our stakeholders expect.

Today, effective regulation requires regulators to take a more principles-based approach… and, importantly, to work together with the regulated community at an early stage to limit behaviour that might not be illegal… but is out of kilter with community expectations of conduct.

What’s interesting here is that, in most cases, the regulated – as a collective group – want to avoid doing things that will make them look bad. The obstacle is often a lack of awareness about the accumulative effect of individual activities on the broader system.

This lack of awareness is understandable. It depends on where you sit in the sector. You may have little to no visibility of things that are eroding public confidence.

That’s why at AFSA, we see the importance of making sure that, wherever possible, you know what we know.

Because we believe that, when we all see the same picture, we will be more effective at working together towards the very important common good that our system delivers.

Thank you.