Unusually, the polity is currently all on the same page on the regulation of financial services. The government admits it should have called the royal commission earlier. The penalties for breaching corporations law are to be strengthened. The Australian Securities and Investments Commission (ASIC) is recognised as gutless. The regulation of financial advice, and the role of the big banks in the provision of advice and wealth management services, is agreed to have been inadequate.
It’s taken a lot of pain, wrecked lives and blatant criminality by not merely financial planners but some of the country’s biggest companies to get here. And that’s why a lame admission from the government that it waited too long isn’t anywhere near enough.
The Liberal Party has known for years what is wrong with the financial planning industry. It knew about the rip-off, by financial planners, and the role of the big banks, as far back as early 2009, when Labor’s Bernie Ripoll convened a joint committee inquiry into the role of the financial services sector and the collapse of Storm Financial and other outfits. It spent nearly a year examining the industry and produced a rare unanimous report.
They knew — but at every stage, the Liberals fought tooth and nail to protect financial planners and the big banks, not ordinary Australians.
The role of the Liberals in trying to thwart Labor’s Future of Financial Advice (FOFA) reforms in 2012, and then in trying to reverse the reforms in 2013-14, is well-known — Crikey was the first outlet to raise the hue and cry about the repeal of FOFA snuck out by Arthur Sinodinos in the shadows of Christmas 2013. But that was only part of the Liberals’ campaign on behalf of the big banks.
In the 2014 budget, the Abbott government slashed $120.1 million from ASIC’s budget — around 12% of its budget and over 200 staff. That came on top of efficiency dividends slapped on ASIC by Labor as well. At that time, then-Labor senator Mark Bishop’s Senate committee inquiry into the Commonwealth Financial Planning scandal was exposing how utterly hopeless the regulator already was. In 2016, this crippled, spineless regulator, with powers and penalties that Scott Morrison now acknowledges were insufficient, was being touted by the Liberals, hilariously, as the “tough cop on the beat” that made a royal commission unnecessary.
Having failed to gut FOFA, but having gutted ASIC, the Liberals then went after their long-term enemy, industry superannuation funds, whom they constantly demonise as corrupt union-run funds. In early 2016, the Turnbull government asked the Productivity Commission to work out a way to end the dominance of industry super funds in default superannuation arrangements, a task being pursued by the big bank-run Financial Services Council. But that has yet to yield any result — the 2017 deadline for the PC’s report was replaced with a 2018 one.
So the Liberals opened another front, arguing that industry super funds — which are run by boards jointly appointed by employer groups and unions — should be forced to be more like retail super funds, with a legislated requirement for external, independent directors. Never mind that independent directors on the boards of the major banks and AMP had done nothing to prevent scandals, correct the longstanding underperformance of retail super funds compared to other super funds or stop related-party transactions between retail super funds and the big banks. Never mind that independent directors would be aligned with the interests of the finance industry, including fee-charging service providers, pressuring funds to outsource functions to the latter. As late as December 2017, the government was still trying to pass legislation imposing the retail super model on industry super funds.
At every stage, the Liberals have gone to the mat for the big banks and financial planners, prepared to remove regulations, cripple the regulator, attack their competitors — and prevent scrutiny via a royal commission. And they did it knowing exactly the kind of damage to ordinary Australians that was being inflicted by the shonks and spivs of the financial services sector. Everything the Liberals accused Labor of in relation to trade unions — being corrupted by their relationship with them, being willing to block scrutiny and help them operate outside the law, being at their beck and call — applied exactly to the relationship between the financial industry and the Liberals. The accusations directed at Labor and the unions were a perfect projection of what was going on on the conservative side of politics.
And ordinary Australians paid the price.
NEXT: The deep links between financial planners, the big banks and the Liberals
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