tip off

Regulation by mateship — Ian and Mathias show the way in financial planning

We’re headed for an era of mateship-based regulation in financial planning, in which the big banks will get away with as much as they can until governments decide it’s politically unpalatable.

You have to admire the government’s dogged determination to look after the big banks. In the face of almost universal opposition to its plans to remove consumer protections from financial advice regulation, including at one stage from the key financial planning industry body, it has ploughed on, bringing in by regulation what it couldn’t do by legislation, even though its drafters mucked up the regulation and reintroduced open slather on conflicted payments to financial planners.

This is despite the Commonwealth Bank’s best efforts to demonstrate, in painful detail, what exactly happens when planners are encouraged by remuneration systems to direct clients into wholly inappropriate platform products, and if clients don’t agree to be so directed, fraudulently manufacture their agreement. Even the Treasurer’s mother-in-law ended up being a victim of “rogue planners”, a term that makes it sound like the problem was isolated to a handful of miscreants rather than reflecting the way Commonwealth Financial Planning did business.

The government is now torn between declaring everything is now fine with the Commonwealth Bank, and with financial planning more generally, and keeping an eye on the extent to which the CBA’s government-prompted apology and compensation process pass the basic test of community trust. It’s a little hard to pass judgment on that at this point given we don’t know which independent experts will form the bank’s assessment panel, a crucial detail missing from yesterday’s announcement.

But both the Commonwealth and the government will be heartened by the initial response of Nationals Senator John Williams, who initiated the Senate inquiry into ASIC and who backed the committee recommendation for a judicial inquiry. “CBA has learnt a lot from this whole process and I acknowledge it has been working to transform its financial planning arms in recent years to regain public trust and confidence,” Williams said yesterday after the CBA announcement. “[CBA CEO Ian Narev] has shown leadership with today’s announcement which I am sure will be excellent news for those people who suffered at the hands of rogue financial planners in the nine years period.”

With all the focus on the Commonwealth since the inquiry, the ostensible sector regulator, the Australian Securities and Investments Commission has gotten off lightly. Remember, this is a regulator so gobsmackingly inept that it not merely ignored repeated efforts by whistleblowers to alert it to what was going on at CFP, when the CBA itself alerted ASIC to the activities of one of its worst planners, ASIC simply lost the report.

And that was before it had its budget significantly cut, as it did in May.

The result — $50 million so far in compensation for clients of the CBA, and almost certainly tens of millions more in further compensation, not to mention the losses inflicted on the wider financial services sector as potential customers turn away from financial planning, unable to trust planners.

You can bet your entire retirement income stream that if an industry super fund had behaved as the CBA behaved, a handpicked Coalition crony would already be heading a royal commission. Instead, the government has worked assiduously to deregulate the retail super sector.

We have an idea of the kind of 70s-style, mateship-based regulation model that will flow from this. The big banks will be permitted to gouge, rip off and exploit financial planning clients, with no intervention by a toothless, underfunded regulator, and allowed to mislead parliamentary committees about their actions, with no repercussions, until they go so far that it puts political heat on the government. At that point, the regulatory mechanism will be a government minister — say, Mathias — picking up the phone to a CEO — say, Ian — and urging them to back off and offer compensation because it’s all looking too embarrassing.

We know this is the regulatory model because, with the government’s gutting of FOFA, the past in financial planning is the future.

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  • 1
    NICHOLAS CARR
    Posted Friday, 4 July 2014 at 1:31 pm | Permalink

    This government is so beholden to the banks that you have to scream blue murder before they shift. They dont give a stuff about the electorate.-only look after their big arsed mates and the IPA cheer sqaud. One term government only!

  • 2
    klewso
    Posted Friday, 4 July 2014 at 1:47 pm | Permalink

    If they give up the CBA they have to give up Murray - and he’s out back doing a pile of their laundry?

  • 3
    Barbara Bradshaw
    Posted Friday, 4 July 2014 at 1:49 pm | Permalink

    It is a scenario that will inevitably end in more tears and make disillusioned electorate even unhappier. And they wonder at their lingering unpopularity and increased cynicism of the electorate.

  • 4
    klewso
    Posted Friday, 4 July 2014 at 1:53 pm | Permalink

    It’s obviously one thing to use those preciously scant tax payer dollars to nobble the Labor Party’s image : it’s quite another to embarrass your conservative mates/sponsors over something like this - or yourselves, as in “Iraq”?

  • 5
    Electric Lardyland
    Posted Friday, 4 July 2014 at 2:35 pm | Permalink

    Government by psychopaths for psychopaths.

  • 6
    SusieQ
    Posted Friday, 4 July 2014 at 2:42 pm | Permalink

    The CBA’s response reminds me a lot of the ‘Melbourne Response’ that the Catholic Church came up with on child abuse - control over the review process, you come to us, not the other way round etc etc.
    Dismal effort by the bank and the government.

  • 7
    Steve777
    Posted Friday, 4 July 2014 at 4:09 pm | Permalink

    What do they call it? Cronie capitalism.

  • 8
    Dogs breakfast
    Posted Friday, 4 July 2014 at 5:07 pm | Permalink

    Such bad press for CBA and the govt, and quite frankly not offering anything other than interest and capital for what they should have earned, is a cheap out for them.

    There should be penalty payments, there should be sackings, the current senior management and directors who were overseeing this should be sacked.

    Here is the culture of the CBA, they knew these guys were cowboys, but as long as they made money for them they were protected.

    That is the problem, the rest is just the fallout. Until they address the cultural problem they deserve no credit.

    As for the govt, well they are just shameless promoters of Big Corporate Australia. If you haven’t got that yet, you are missing the point.

  • 9
    AR
    Posted Friday, 4 July 2014 at 5:29 pm | Permalink

    Once Torys knew the worth of appearing to observe noblesse oblige whilst enabling the BigAr$e brigade to wreak havoc but this lot don’t even understand the quid pro of such pretense, klet alone give a pinch of the proverbial.

  • 10
    AR
    Posted Friday, 4 July 2014 at 5:29 pm | Permalink

    Once Torys knew the worth of appearing to observe noblesse oblige whilst enabling the BigAr$e brigade to wreak havoc but this lot don’t even understand the quid pro of such pretense, let alone give a pinch of the proverbial.

  • 11
    Bento
    Posted Friday, 4 July 2014 at 5:39 pm | Permalink

    I’m one for looking at the positive, and hell knows we need some positive news in what is quite often the dirtiest of industries. You just have to be impressed with the media’s role in all of this. Well done to the only people who could get anyone to move on this. The result will be appalling and the parties insincere about the need for reform but the public is now informed as best they can be.

    When you consider the power of so called financial planners, their bank masters, the industry captured regulator, and the government. All complicit in a well organised racket of profit through repeated fraud, who for years conspire to do nothing but push the little guys who dare to speak up, back into their corners.

    In rides the fourth estate blows the lid off. Actually quite breathtaking in all it’s disgusting glory.

    Imagine the damage to our noble banking mafia….sorry…errr…”pillars”, when the extent of the massive (and rarely discussed while we are booming)Australian sub-prime lending market goes bust. As usual, light will only be shone in these dark places when a lot of people lose money, and all the watchdogs are too busy patting themselves on the back for implementing reforms that do sweet F A.

  • 12
    tonyfunnywalker
    Posted Friday, 4 July 2014 at 5:57 pm | Permalink

    The CBA response is similar to that of News Ltd when the phone hacking scandal broke - a few rogues - we have weeded them out and now everything is fine and dandy. Internal reviews are always a way to “white wash” and minimise collateral damage and it would seem that Cormann is playing along and he does have a very persuasive war chest of donations to consider – the undoing of Sinodinos and his “yellow card “to sit on the backbench for a while.
    The hollow “sorry “yesterday was appeasement for fear a Royal Commission becomes a reality and the review an inadequate response. Reminiscent of the CEO of BP after the Gulf of Mexico oil spill the ” damage control ” was overseen from a holiday cabin in Indonesia. Arrogance or lack of executive responsibility for the trashed Brand Image of the CBA?
    I am sure the shareholders will be impressed when bonus time comes around.
    The fact that other banks are equally culpable is questionable – are their victims to be ignored while the CBA makes some recompense — - solo.
    The CBA PR machine and that of the ABA are hard at work in damage control again taking lessons from both Blair (BAE scandal) and the News Ltd hacking scandal.
    Is this a case of too big to fail and too big to jail?
    The gazetting of the very flawed revised FoFA regulations will keep the issue alive ( thanks Crikey ) in the Senate the fact the Minority Report has lost its effectiveness as the author was not even present when critical evidence of fraud was presented by the victims.
    Like everything else that the Abbott Government has implemented since the election the odium of incompetence, ineptitude and arrogance providing a cumulative backdrop to the poor polling and the universal mistrust and dislike of Abbott and the majority of his front bench.
    The implementation of the “tea party” ideology and the power of the Dollarocracy with the purchase of self-serving plutocratic driven influence will; - if it allowed to continue will mean the demise of the LNP as a one term disaster and also guarantee a very long period in opposition.
    A ” good riddance chorus ” will be voiced by all and not just the “lefties” in the electotate — but the moderate “righties” as well.

  • 13
    Glen Laslett
    Posted Saturday, 5 July 2014 at 10:41 am | Permalink

    Well, this is worse than “tricky and mean” it’s just stupid and has the appearance of a clumsy attempt to sustain the corruption in the financial planning industry.

    There’s so much money involved, the shonks and psychopaths are attracted to it like bees to honey. Goodness me, what DOES the Coalition owe to the banks?

    This is beginning to look like what goes on in some of our Asian counterparts - special favours for groups of cronies and deliberately induced (or at least tolerated) extreme income inequality.

    Matthias, just what do you think that you’re doing? The next CBA type scandal will be laid at your doorstep!

  • 14
    klewso
    Posted Saturday, 5 July 2014 at 11:08 am | Permalink

    Government by Mate’s Rates”

  • 15
    Broony Saint
    Posted Saturday, 5 July 2014 at 2:33 pm | Permalink

    I would be interested in knowing how many retirees will now have to rely on a gov’t pension. Not that the Neo-libralism party would show sympathy.

  • 16
    Broony Saint
    Posted Saturday, 5 July 2014 at 2:44 pm | Permalink

    Who here is old enough to remember when the exchange rate was set once a year. Thank the 80’s yuppie for inventing the making of money from thin air. No need to produce a product to sell.

  • 17
    Ken Lambert
    Posted Saturday, 5 July 2014 at 7:35 pm | Permalink

    The CBA chief executive (earning something like $6 or 7 million p.a.) should be called in for a nice cup of tea by Abbott and Cormann.

    It should be suggested to said CEO that CBA immediately refund all the lost funds plus interest to the victims of CBA’s financial planners, and exemplary damages for those victims who have lost homes and suffered great distress, assessed by an independent consultant firm.

    If Mr CBA CEO does not agree, it should then be suggested by our brave political duo that CBA’s banking licence be reviewed under the ‘fit and proper’ provisions in view of prima facie evidence of fraud and grave conflict of interest by CBA employees ultimately responsible to the CEO and board of the CBA.

    It might also be suggested that the Board of the CBA could all be liable as directors of a company perpetrating a fraud.

    I would venture to suggest that Mr CEO, having already admitted guilt by apology, would report to a hastily convened board meeting that the prudent path would be to accept Mr Abbott’s and Mr Cormann’s suggestions and justice is then delivered to the victims without any messy litigation and ambulance chasing lawyers.

    Ms Credlin could carefully leak her boss’s role in the pursuit of justice for victims, and Abbott & Cormann would forever be held in high esteem by mom and pop investors throughout the land.

    Sadly Abbott and Cormann wouldn’t have the cojones for such as nice cup of tea, and the above is all a fantasia of wishful thinking, since both would be worried about their post-political jobs as board members of some Bank or other probably in around 2016.

  • 18
    Sean
    Posted Sunday, 6 July 2014 at 12:33 pm | Permalink

    What? Bernard Keane’s stopped apologising for the Coalition, his erstwhile employer? OK.

    You also have to question the credentials of the other revolving door toothless tigers supposed to be regulating the banks, the RBA and APRA, and their ability to curb excessive bank lending and endogenous money creation for mortgages to prop up a housing bubble.

  • 19
    rossmcg
    Posted Monday, 7 July 2014 at 1:29 pm | Permalink

    Ken

    Much more likely that the head of CBA will call Abbott and Cormann in for a cup if tea and he will tell them what CBA is prepared to do, how to limit the terms of any inquiry, how the Government will spin it and just how much the bank has donated to the party over the last little while.

  • 20
    The Pav
    Posted Monday, 7 July 2014 at 4:27 pm | Permalink

    Previously I have never considered any Federal Govt corrupt in the venal sense.

    I might have disagreed wityh the philosophy, beliefs etc but I awlays thaought there was no real corruption such as we are seeing revealed in the hearings in NSW.

    Now with this govt I am not so sure. The association with Murdoch , tobacco and now the big banks make me now conisder that this govt is corrupt not just morallay but in all senses of the word.

    Perhaps it is hardly surprising given that Abbott comes from NSW

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