On Sunday,
on the ABC’s Inside Business,
the Chairman of ASIC said “without law reform we just can’t make anyone
do anything” to correct the excessive commissions which compromise the
independence of financial planners advising clients. He conceded that
he had no hope of outlawing commissions and went perilously close to
endorsing 2% as the kind of “maximum” commission that quickly becomes
an industry minimum.

On Crikey
over recent weeks, I have drawn attention to the inordinate political patronage
flowing to the financial planning industry from the Government. On Thursday, in
Sydney, the Chairman of ASIC politely asked for relief from the associated
political pressure to go easy on a profession widely considered to be
‘institutionally corrupt’ and operating in a way that is sapping the retirement
savings of ordinary Australians.

The results of a “shadow shopper survey” of financial
planners completed in December were not released until last week. The
results were predictably damning and it is a reasonable inference that
the industry was consulted about the handling of the results. One
inkling of the damning results was the announcement, five weeks ago, by
the financial planning industry association (FPA) of new principles for
handling the “conflicts of interest” that were identified in the
shopper-survey as the dark shadow over this industry.

While
pre-consultation may not be unreasonable, it is indicative of a
regulator unable to act decisively and independently in the community
interest. Unfortunately, it is probably also indicative of the weight
of political expectation on a nominally independent regulator of a
politically protected species.

Jeffrey
Lucy, the Chairman of ASIC, sounds like a man on the ropes – under political
pressure he seems to be saying things he does not understand, hoping they are
true, unaware they are not. On Thursday at the ASIC media briefing, while using
the same “on a journey” jargon as the FPA, he was suggesting customers have
recourse when they do not get the “best’ advice (unmindful that ASIC only
requires “appropriate advice”) and his exhortation for customers to “complain”
was similarly unmindful of the impenetrable brick wall confronting anyone who
complains about “bad” advice or “excessive” fees to any of the industry
complaints agencies. Financial planners routinely give their clients advice
which they know to be “not the best” without fear of retribution.

Jeffrey Lucy
is clearly saying that ASIC wants the financial planning industry to substitute
reasonable “flat fees” for excessive “lifetime commissions” (and he knows that
APRA and the RBA agree). However, it is the planner industry lobbyists that have
the ear of the Government and, knowing that they do, the FPA was able to respond
to the damning criticism in the shopper survey with characteristic insouciance:
they do not need to care about it and they don’t.

Peter Fray

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