A royal commission is warranted, but it must keep its gaze on both the big banks and the industry super funds rather than pester small businesses.
They say journalism is the art of turning up too late very quickly.
And so it was that in a moment of good fortune I found myself already in the nation’s capital on Thursday morning as the Turnbull government announced its momentous backflip on a “royal commission into banking, superannuation and [the] financial services industry”.
This publication – despite its well-disclosed and much-appreciated commercial support from financial product providers – has not been afraid to investigate and criticise the major financial institutions.
As an advocate for the independent and non-bank advice sector, and a fervent participant in industry debates, ifa has had a front row seat to the systemic misconduct and illegality by major players, which have tarnished the reputation of the broader industry and put consumers at risk.
That is why as far back as mid-2015 ifa joined calls for a royal commission as the only mechanism with sufficient teeth to get at root causes and big fish.
Some in the IFA sector are celebrating at the news, while others have very real and valid concerns that this royal commission will be nothing more than another beat-up on financial advisers.
The hopes we outlined at that time – that any such inquiry focus on the intended targets, including CEO and board level execs – must be repeated loudly now.
Given the inherent cowardice of many politicians on both sides of the aisle, and the Westminster system of party solidarity itself, no one should be surprised to see the well-funded, lawyered-up big end of town evade justice once again.
The regular appearances of the bank CEOs and chairs before the committee that the government hoped would avoid a royal commission has been nothing more than a farce – an opportunity for the banks to repeat verbatim the scripted weasel words of their well-paid spin doctors and legal counsel.
Similarly, the previous Royal Commission into Trade Union Governance and Corruption failed to properly address the problem of secret payments between industry funds and the trade union movement, since it was not its primary focus.
The new report from the Institute of Public Affairs blowing the lid on these payments demonstrates just how serious this problem is, with $18 million flowing from funds to unions with little or no benefit to fund members (many of whom are no longer represented by unions and may not support the political aims of an increasingly irrelevant and militant labour movement).
In order for it to even come close to justifying the $75 million taxpayers will be forking out for it, this royal commission must look at the rotten core of the financial system – the web of incentives and crony capitalist ties between government, lobbyists, banks and super funds predicated on the cash cow of Paul Keating’s compulsory superannuation.
While the idea that all Australians should be encouraged to invest in their retirement is sound, the system that followed has become mired in conflicts, with poorly-disclosed vertical integration and product bias on the bank side and pernicious political ties and profligate advertising spend on the industry fund side.
Both of these conflicted systems – neither of which have been a friend to the IFA sector – have so far failed to be taken to task properly despite inquiry after inquiry.
This royal commission may well do the trick, particularly with an eminent and objective commissioner in the form of High Court Justice Kenneth Hayne at the helm.
In addition, the draft terms of reference go some way to establishing the correct target, with “the use of superannuation members’ retirement savings for any purpose that does not meet community standards or expectations” as well as “risk management, recruitment and remuneration practices” both clearly specified.
However, history tells us that once the circus gets rolling and the silks start talking, the focus may once again turn to the softer target of SME professionals and distributors of financial products – the advisers, brokers and others who are trying to work hard for their clients as best they can in a crooked game they didn’t create.
This publication won’t be letting that happen quietly.
Aleks Vickovich is the managing editor of ifa and was named Columnist of the Year 2017 at the Mumbrella Publish Awards.
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