Every so often you’ll read a story about how Australians are terribly underinsured when it comes to life insurance. Such stories originate, unsurprisingly, with insurance companies. The scare stories don’t work, however, and Australians continue to blithely go about their business, uninterested in the purported dangers of being underinsured. The only reliable means of getting them to fork out for life insurance is to opt them into life policies as part of their superannuation and hope they don’t notice.
David Murray, of the financial services inquiry and, soon, “beleaguered” AMP, is similarly trying to scare people with his warning that the banking royal commission shouldn’t do anything that might make it more difficult or expensive for people to access financial advice, and shouldn’t take any action against the vertically integrated — or, as you might also call it, conflicted — model of financial planning and wealth management.
Given the revelations of the royal commission, fretting that senior Australians aren’t getting enough access to financial advice is like worrying teens aren’t getting enough access to alcohol. Murray evidently believes that the financial planning industry’s efforts to professionalise itself — and thus reduce the risk that customers will get dud advice — are perfectly adequate. “Reforms to this end are already in place, and time is needed to determine the outcomes of these existing reforms before additional regulation is considered.”
Exhibit A on that score, Sam Henderson, whose views once graced the very pages Murray’s words appear in today. Exhibit B, Dover Financial. Neither are with us any more, in a financial planning sense, courtesy of the royal commission. Neither were the detritus of the planning industry, the worst of the worst, either. Both were prominent players, industry heavyweights. The professionalisation of the industry, such as it is, did little or nothing about them. How Murray can seriously think, in the wake of the royal commission hearings, that the current professionalisation trajectory just needs a bit more time, is inexplicable.
Murray is also, famously, the father of vertical integration in Australian banking. Or more aptly, he will be the alpha and the omega, still defending it at the very end as he was present at the creation, insisting that the fundamental problems of conflicted advice can be regulated away — a ludicrous proposition given the performance of the purported consumer financial regulator, ASIC, which is still “standing ready” to intervene more than a decade after the case for blunt-force trauma-style regulation in financial planning was demonstrated.
That James “John Milton” Shipton’s “they also serve who only stand and wait” regulatory approach could ever address the profoundly skewed incentives that vertical integration creates is as silly as Murray’s denialism on financial planner professionalism. “You can’t regulate for culture,” Murray continues to insist. Actually, you can, as APRA has shown on Murray’s former bailiwick, the Commonwealth Bank. But Murray is at least right in the sense that ASIC certainly can’t regulate for culture. It can’t regulate much at all.