The CEOs of the four major Australian banks are meeting with the house of Representatives Standing Committee on Economics to answer questions on their performance and the banking sector. The banking Review is posed as an alternative to the Royal Commission into banking misconduct this country so badly needs.
Not surprisingly it's being touted as a 'get out of gaol free' card for the banks. The countless scandals and conflicts of interest that, for the most part, have risen out of the way banks are structured and the remuneration of their employees, will not be adequately addressed.
Financial advice and the products sold under its banner in this country are fraught with conflicts of interest, compliance breaches, forgery and fraud. Superannuation funds, the single most important savings pot for a large a majority of Australians, are compromised because of unfairly high fees charged by 'Fat Cat Funds' -- mostly controlled by the banks.
We desperately need much more than this Review to lay bare the problems caused by the vertical integration of banks and their dominant market power. Thousands of Australians have been swindled out of their life-savings through dodgy financial advice and exorbitant high fees.
So to avoid the 'Review' becoming a total farce and another tax money waster, here are the very important questions that need to be asked over the coming days:
Australians expect fair and unbiased financial advice from experts who are educated to understand the balance of financial risk and return. Unfortunately, what many Australians mostly get is product pushing from an unqualified 'bank sales person'. Not to say there's anything wrong with sales people, we just don't want them selling complex financial products under the guise of advice.
- Is it reasonable that bank-aligned financial advisers can only offer financial products from their bank-owned platform when the identical products exist 'off platform' and at a much lower cost?
- Why is it reasonable that your financial advisers can't recommend strategies or products that are in the client's best interest but are not available on your bank-owned platform?
- What are the claw-back provisions on bank executive pay if there is another financial advice breach? How much of your pay do you stand to lose?
Superannuation and investments
Superannuation and investment fees are arguably Australian bank's largest swindle of all. Australians pay over $23 billion each year in superannuation fees which the Grattan Institute suggests could easily be halved. Here are the questions that need to be asked of the Big Four in regards to super fees:
- Will you commit to moving all customers from Fat Cat Funds to low fee funds in 2016?
- Will you compensate the victims of your Fat Cat Funds who do not have enough money to adequately retire due to the impact of your fees on their savings?
- Would you support a national tender process for default super? If not, why do you believe this would not be in the interest of Australian consumers given the quantum wasted in Fat Cat Funds?
Laws around the incentivisation of bankers, tellers and bank-aligned financial advisers need to be reconsidered in light of the recent spate of scandals which implicate the financial advice and insurance arms of the country's largest banks.
We wouldn't accept it if doctors were employed by drug manufacturers and could only offer medication made by their employer. Equally, financial advisers cannot continue to be controlled by those manufacturing (i.e. the banks) the financial products they sell.
It is deeply unfair that they are sold products from bank staff and aligned advisers who are incentivised to recommend financial products that benefit the banks' bottom line. Many of which should never end up in the hands of retail consumers including shonky insurance, complex derivatives and forestry investment schemes.
Sadly, it's unlikely this Review will bring the well-overdue separation between financial advisers and the product-manufacturing banks.