Michael Pascoe writes:

ASIC’s discussion paper on the finance industry’s rampant rorts and conflicts has generally been taken as a nice first step in trying to right some of the wrongs. In reality though, it’s an admission of failure and lack of nerve by the regulator.

The paper shows again that ASIC is not a totally stupid organisation, that it knows people are being seriously ripped off on its watch and have been for years. A reasonable person might then wonder why ASIC hasn’t done something about it.

Yesterday’s discussion paper is broad in scope, ranging from the investment bankers playing with the big guys down to the sorry litany of crook financial planners stealing from their clients. There’s really nothing new in it – everyone in the game knows all ASIC’s little hypothetical examples regularly occur. ASIC is simply confirming that it also knows, that it’s sat back and watched the crimes being committed.

The easiest example, simply because it’s been so well documented for so long, is at the lowly financial planner stage. Most financial planners these days are honest people doing a fair job, but plenty are not. As long as their industry is structured to conflict and tempt financial advisers, plenty will continue to do the wrong thing.

It was only two weeks ago that ASIC’s own “secret shopper” expose demonstrated that one third of financial advisers with a commission or ownership conflict steal from their clients – but ASIC was too lacking in gonads to even name the shonks it caught in the process. The Today Tonight and ACA crews would have done better.

And here’s limp ASIC again on display in yesterday’s paper. The AFR reports it well enough:

The most controversial conflicts in the latest report included six-figure payments to advisers who were prepared to switch all their clients’ investments from one fund manager to another, even if the new manager had higher fees and lower returns than rivals. The regulator also suggested that planners give lengthy written advice to investors to cover their own legal obligations, even if the documentation was too complex for investors to comprehend.

ASIC suggested that some practices should be stopped altogether, such as fees that are often paid to get managed funds on approved product lists used by financial planning firms, as it was impossible to manage the potential conflict of interest properly.

“The indications are that a lot of people won’t agree with (the report). It is hard to have a discussion with an industry that has had structural practices in place since the year dot,” deputy ASIC chairman Jeremy Cooper said. “We are not trying to create law. We are just trying to get awareness of the power we have to supervise how conflicts of interest are managed.”

Or not, as the case may be. I can just feel corrupt financial advisers quaking in their designer shoes at the thought of ASIC’s awareness of the power it has but doesn’t use.

If the Federal Government took ASIC’s role seriously, it would drag Allan Fels out of retirement and unleash his name-and-shame regime with a recommendation that he kick heads wherever he sees them. If you’ve got the power, bloody-well use it.

But it looks like Canberra doesn’t much care – and neither does ASIC.