Steve Johnston, GM, Corporate Affairs and Investor Relations, Suncorp, writes: Re. “Australian banking system showing signs of stress” (yesterday, item 29). Here are some facts for the record:
- All Australian banks are seeing an increase in bad debts, not surprising given current economic conditions. Suncorp, however, is more strongly capitalised than most with a capital adequacy ratio of 13.24%, adjusted common equity ratio of 6.29% and Tier 1 ratio of 11.39%, all of which are well above regulatory requirements and internal targets.
- Far from being “all but broke” or at “death’s door”, Suncorp made a first half net profit of $258 million.
- There have been a high number of weather related insurance claims this financial year but the Group has been very well protected by its reinsurance arrangements.
- Suncorp has consistently said it supports the federal Government guarantee scheme — it has provided good access to global funding for all Australian banks. Its (and other regionals’) point is that, in practice, the market is looking through the sovereign guarantee and pricing on underlying credit ratings.
- At no stage did Mr Skilton or anyone else “complain about the ACCC approving the Westpac-St George or Commonwealth purchase of BankWest”. Mr Skilton did say the differential in wholesale funding costs made it extremely difficult for regionals to provide effective competition to the majors across the full product suite.
- In recognition of this, Suncorp’s bank is focusing on core portfolios and running off predominantly wholesale funded non-core portfolios over time. This strategy will ensure the bank is sustainable over the longer term.
Simon Hoyle, Editor, Professional Planner, writes: Re. “Financial Planning Week superannuation special” (yesterday, item 6). The financial planning industry and its practitioners crave the status and kudos that would come from belonging to a true profession. Good on them — that’s a noble aim, and moves to establish financial planning as a true profession are to be applauded. It would be not only in the interests of planners themselves, but also in the interests of clients — present and future.
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Unfortunately, when the issue of commissions versus fees comes up, rational argument seems to go out the window. It’s understandable that financial planners themselves are sick and tired of the debate; however, until the structure of the industry changes this debate will not go away. Nor should it. Fees vs. commissions is only one part of a bigger argument raging about what it actually means to be a professional. But the remuneration issue has to be settled before anything else meaningful can be achieved, and there’s really only one way it can be settled.
In short, commissions have to go. That’s the position outlined in the Financial Planning Association’s recent consultation paper. The paper is not perfect (that’s a discussion for another day), but it’s got the ball rolling — as evidenced by its appearance today in Crikey.
When it comes to compulsory super, as Bernard notes, commissions cannot be justified morally (let alone economically). And when it comes to wanting to be perceived as a profession, commissions simply have no place. Forget arguments about “choice”; forget arguments about commissions being the only way to enable some people (i.e. the young and the lower income earners) to obtain good financial advice. Those arguments just don’t fly when you begin to examine the public interest issues that a debate about professionalism necessarily incorporates.
A group of people cannot just declare themselves to be professional, and expect to be accepted and respected as such. If financial planners claim to be professionals, then it’s Professional Planner’s intention to hold them to that claim, to make them prove it, and to make sure that’s what they really are. But based on the feedback I’ve received through the magazine, the website and by direct e-mail, it seems to be the view of some that once you’ve declared financial planning to be a profession, then there’s not much more you have to do.
As long as they, as individuals, behave ethically, everything’s OK. On this basis, they argue, it does not matter whether they receive commissions from fund managers, or whether they’re paid for their services by their clients, as long as they treat clients right, and as long as all the conflicts of interest that exist in the business are adequately disclosed.
These arguments fail to appreciate the big picture: You cannot be a professional if the industry you work in is not correctly structured. And as long as financial planning continues to be supported by commissions paid by product manufacturers, it’s not properly structured. It should be supported by payments from clients — the people whose interests planners are meant to represent. How can an individual claim to be a professional, to put clients’ interest first and act in the public interest, if their paymaster is the financial institution whose products they sell?
Payments from product manufacturers to financial planners have to be abolished, and be replaced by payments from clients to financial planners. And critically, the clients must retain control of those payments. If a client thinks they’re not getting value for money, or if they simply want to switch from one planner to another, they should be able to do so easily and, when they do, their payments should move with them.
Remuneration forms but one part of the bigger “professionalism picture”, because it relates to the issue of whose interests are put first in the planning process. Being a professional doesn’t mean that it’s enough to just disclosing potential (and actual) conflicts of interest; it means all steps must be taken to eliminate those conflicts in the first place.
In the upcoming edition of Professional Planner, there’s a telling comment from the Chair of the Parliamentary inquiry into financial products and services, Bernie Ripoll, MP. Ripoll makes the point that if an accountant rips off a client, the public assumes it’s a rogue individual. But if a financial planner rips off a client, it merely reinforces the popular view of the entire financial planning industry as crook.
The questions are: Why do the reputations of accountants (or lawyers, or doctors) transcend the behaviour of any particular individual? And, what has to change for the same to be true of financial planning? The answers are blindingly obvious yet there continues to be resistance within the financial planning industry to the necessary structural change.
Bernard is correct to note that the Financial Planning Association has sniffed the breeze and knows change is coming — one way or the other.
Smart planners know that, too.
The age pension:
Tas van Ommen writes: Re. Yesterday’s editorial. I’m a bit disappointed by the unsophisticated responses about the lifting of the retirement/pension age from many in the commentariat including Crikey! For example, Crikey bemoans union complaints, criticizing: “Opposition to lifting a retirement age that was established 100 years ago and hasn’t been changed since”. This is a dopey argument that fails to recognize that we like to think we have built a better standard of living in the last 100 years.
For example, most of the same commentariat would generally applaud paid maternity leave — heck, 100 years ago (and more recently) women were barely allowed in the workforce and most who did were forced out when they married. How is it we now expect the wider community to bear costs of keeping women’s participation in work through their family-rearing years? Simply because my great grandfather dropped off his twig before he had the benefit of some fulfilling years of retirement doesn’t mean that I should aspire to the same. Running water, sewerage, public health, antibiotics…
How far back should we wind our calls on public largesse in order to maintain a constant level of intergenerational misery? It also seems rather hypocritical that many of those who are law-makers, policy advocates and commentators are both well provided-for in their prospective retirements and simultaneously happy to “hobby-away” in consultancies, board-memberships, (or freelance writing) at ages when the real victims of this shift will be shuffling their weary bodies off to 37.5 hours of drudge. (I note that I am probably one of this more privileged set whose professional interests will likely continue beyond official retirement).
Anyone else uncomfortable about this?
Adrian Hempel writes: Re. “Roxon faces public health wrath over blocked report” (yesterday, item 16). Public health advertising has lost something in the last 20 years. Compare and contrast this advertising campaign:
And this advertising campaign:
They just needed to re-dub, replacing “gays and IV drug users” with “pigs and Mexicans”, and “condoms” with “tissues”.
They could have saved so much money in these financially troubling times!
Zerin Knight writes: Re. Wednesday’s editorial. The comment in Wednesday’s Crikey is a load of twaddle! There are thousands of people who work hard all their lives and never make it to the top 200 rich list.
As for Turnbull joining parliament out of a sense of duty, what a joke! A more plausible reason for people becoming politicians is the power that they enjoy.
So please, spare us your preaching on behalf people in life who have had a lot of good fortune along with their hard work (SOME of them do work for their money — we won’t even mention those born with a silver spoon in their mouth!
Sonia Morris writes: Re. “Israel’s ‘useful idiots’ in the Australian media” (yesterday, item 21). Instead of constantly censuring Israel, why don’t you just for a change reprove other regimes such as Zimbabwe or Darfur or many other countries which have appalling human rights transgressions?
Why don’t you take to task any of the Arab nations which have allowed the Palestinians to live in poverty, and have not lifted a finger to help them, let alone allowed them a home with their extremely wealthy Arab brothers?
Tony Barrell writes: Maybe we are getting closer to discovering what it is that those who like to think they are in touch with the real people have against people who drink Italian coffee with milk in it. They have now been identified by Les Heimann (yesterday, comments) as ‘the motiveless and uneducated latte clique’ who hates Israel and the USA. Clearly it’s time the non-conformist filth who won’t drink copious amounts of International Roast should be rounded up and dealt with. BTW has Crikey’s gratuitous latte reference elimination procedure been dis-implemented?
Can you Werbeloff?:
Joseph Cutcliffe writes: Re. “Can you Werbeloff? Crikey readers weigh in” (Wednesday, item 22). (Wuthering Heights). So this posh dude stays at this dicks house and a ghost says “oy bro totes Heathcliff” so some old chick tells the story and he says “I though that dude was fully sick but he aint” and he goes sniff sniff a-choo and Heathcliff fully croaks it. Then some Bush chick sings about it.
Joseph Cutcliffe writes: (A Jerry Bruckheimer film). Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM Chk chk BOOM.
Joseph Cutcliffe writes: (Bah Bah Black Sheep). So this Abo sheep is like “ey bro” and these dudes say give us some of that furry shit and he’s like “nah way I aint got shit” and then he shaves it like clip clip bzzz and he’s fully totes a pedo coz he gives it to like some kid down a laneway.
Joseph Cutcliffe writes: (The Three Tenors). A fat wog and two skinnier wogs.
James McDonald writes: (North Korea). So there’s two gooks crapping on, right, the slick gook says to the angry gook: “Aw bro’ they don’t understand you and now you’re fully sick eh, here is a nuke go play with that”. And the angry one goes: “Those doctors gave me six months, for sh-t eh, did you ever hear the one about the airline pilot who decided to total himself?” and goes tap-tap boom!
Chris Johnson writes: (Clare on herself). Obsessed white chick hanging out with fratstars to hook buff studs gets fronted by TV stalker so I strut ass and bullshit dreams. No guts no glory. Pwned.
Climate change cage match (now with its own blog):
Stephen Luntz writes: Arguing with Tamas Calderwood (yesterday, comments) is completely pointless, except when its fun, like today. Calderwood’s big refutation of global warming includes this data “1979-89 shows an average monthly temperature anomaly of -0.05C below the 30 year mean, 89-99 is +0.06C and 99-09 is +0.2C.” which he dismisses as trivial rate of growth, neatly contradicting the “smart guys with computers”.
So a rise of .11 in one decade, followed by .15 in another. If Calderwood objects to using computers he can do this one by hand. Let’s say the rate of acceleration is constant (a very conservative estimate for many reasons) and the next rise is .19, followed by .23, ,27 and so on.
By 2050 temperatures will be 1 degree higher than today, and by the end of the century we’ll be almost 3 degrees higher than in the late 20th Century. A change whose death toll would be measured in the hundreds of millions. Not the most sophisticated modelling perhaps, and below the serious estimate but just one more way of saying that we’ve got a problem to address.
Adam Rope writes: Ah, Tamas, Tamas, I do apologise for using “appeals to ‘scientific’ authority” when discussing science, but since I am not an expert in any of the relevant fields I’m not actually “claiming ‘El Nino did it’ in 1998”, I’m merely reporting what many climate scientists have themselves written. And on any graph of recent temperature data the 1998 El Nino peak I mentioned is a very, very obvious anomaly, and thus my “rhetorical distortions of scientific data” and “disingenuous with the scientific data” statements were made because the “no warming since 1998” line you follow is dishonest, since it can only be made because no temperature has reached that single one-off peak.
You then present your own personal interpretation of the “scientific” data — your own calculations based solely upon only one of the many sources (UAH satellite) of global temperature data available — and claim an “average” global temperature anomaly that differs from other sources.
Fair enough Tamas, and I honestly congratulate you on your sterling efforts, but can you please advise us as to which “average” anomaly you are calculating from this limited set of data — the Mean, the Median, or maybe even the Mode? And rather than the size of the individual “average” rise, what about the effects of cumulative change to global temperature, and CO2 levels?
Finally I honestly cannot say from my own limited scientific knowledge if AGW (Anthropogenic Global Warming) is occurring but — outside of those media spruikers on either side of the argument who exaggerate, and therefore diminish, their case — I prefer the actual interpretations of the real data made by those “smart guys” might actually know what they are talking about.