In a statement, ISA said the former chief executive of the FSC was reported saying the big four banks should sell their wealth management arms.
“Vertical integration and flawed remuneration policies are plaguing the banking and financial services industry,” ISA cited Mr Brogden as saying.
“If I was on the board of the one the big four banks at the moment, I would be telling the executive to look at selling their wealth management arm.”
ISA has backed these remarks, arguing that the governance and culture of major banks is currently the “number one risk” in the financial services industry.
“During the first quarter of 2016, we have had more bank scandals reported than public holidays in Australia. In the midst of these scandals, the banks have shamelessly sought to redesign the super system to suit their business models,” ISA chairman Peter Collins said.
“Over the past two years, we have seen the banks lobby to remove consumers’ protections for people who need financial advice, lobby to dismantle the governance model of not-for-profit funds, and lobby to remove protections for people who do not choose their own super fund.”
Mr Collins said this behaviour was evidence that “members’ interests are not being prioritised” and raised questions about whether banks should be part of the super system.
“The Productivity Commission review of the super system will provide one opportunity for a thorough assessment as to whether the business model of the scandal-prone banks is consistent with the best interests of super fund members,” he said.
Last week, The Ethics Centre executive director Simon Longstaff told ifa that vertical integration within the financial services industry could be successful once financial advisers were recognised as professionals.
@Dakka
They wont join the dots as there are ‘none so blind as them that will not see.’
Oliver C…Its good to deliver a commercial outcome if that outcome supports the Union movement as a funding source and a political voice in the face of dwindling Union membership. A commercial outcome is bad when it relates to advisers, banks, shareholders and lets not forget the tax community via tax receipts. A leftist socialist view and strategy being played out before our eyes plain and simple. Fits nicely with the uninformed communities pastime of bank bashing. Why the media including IFA can’t or wont join the dots on ISA and Unions is beyond me.
Why are the union super funds sponsoring football teams, jockeys and plastering ads all over TV, Internet and print if they aren’t commercially driven? Odd to be spending all that money for no reason or benefit….unless it was to deliver a commercial outcome for them
For all the criticism I read here, let’s not forget that many of the bank’s wealth management arms were charging 2.5%-3% pa for an average balance, just a few years ago.
This is now down to about 1.5% pa, inclusive of advice. More money in the client’s pocket, not the bank shareholders.
FOFA legislation and competitive pressures from ISA have played a key part in this.
ISAs have their limitations, and David Wheatley often talks out of his hat, but let’s give credit where it’s due. The banks would not have done this out of their own good grace.
Clearly the ISA are prepping their act for next year’s Melbourne Comedy Festival…
[quote name=”Angelique McInnes”]It is impossible for commercially driven institutions to reconcile their commercial interests with fiduciary duty obligations under the current system.[/quote]
I’m not a particular fan of banks or industry super, but this comment is somewhat hypocritical. Aren’t we all ‘commercially driven’? Or are we all happy to run our businesses at a loss, offering pro bono advice? I love my clients, and do my utmost to put them in a better position and help them to achieve their goals. But I won’t apologise for being successful while doing it.
The banks lobbying to remove consumers’ protections for people who need financial advice, in particular insurance advice is called the Life Insurance Framework, the ‘reform’ Bill the ISA went to the trouble of supporting in a submission the recent Senate Economics Committee, and in the media. And, as others have commented, let us list the ways consumers are disadvantaged by having their insurance inside their super fund, and the undisclosed commissions those funds earn on that unadvised, sub-standard cover. Double standards ISA.
Well, that’s the pot calling the kettle black! Vertical Integration and Industry Super funds both have self-interested bias and constraints – hence neither can provide the depth and scope to ensure client’s best interest.
It is impossible for commercially driven institutions to reconcile their commercial interests with fiduciary duty obligations under the current system.
Rubbish. Industry Super Funds are a scandal. They align themselves with advisers saying if another fund is more suitable we are ok with you moving the member – yeah right. I wasn’t born yesterday. Disclosure, Insurance definitions – I can come up with lots of reasons to rollover – any industry super fund want to join with me??!! Advice should not be aligned to product and Industry Super Funds ARE!
so the Industry Super Funds own Asset Management areas aren’t a form of vertical intergration and requiring members to take on sub-standard default insurance that never pays out is not as big a scandal. The IFA’s are the only ones who have to have the clients interests at heart as we dont get supported by our related parties.
simple fix but to hard for the regulators:
All advisers must be licensed directly . No authorised representatives .
“Over the past two years, we have seen the banks lobby to remove consumers’ protections for people who need financial advice”
What???!!!! How scandalous that they have been doing this – they have copied the ISA – plagurism!!!!
Who is the ISA to lecture on the demons of vertical integration, when they have gone done the same path? If I go to an adviser employed by Industry/Union Super Funds, what fund am I going to be recommended? It certainly wont be one run by a bank and definitely not an SMSF, it will be a union super fund that gets recommended to me.
How any adviser could recommend Australian Super and its insurance cover is beyond me. How the trustees can agree to a change in insurance definitions for existing members to continue to make it easier to get new members on the books is a disgrace. That’s the story that Adele Ferguson, ASIC, CHOICE and others should be looking at.
Plus the fact that I understand Union Super Funds receive commissions from insurers when members upgrade their level of insurance above the minimum default cover. If true that would be the ultimate hypocrisy.
Rather than simply reprint the Industry Super propaganda, perhaps the journalist should question them?
In the same article John Brogden criticised Industry Super for setting up their own vertically integrated advice channels… how can the article be balanced if not addressing that?
More breaking news, no one is trying to remove protections for people who do not choose their own super fund, they are trying to give them an actual option of all valid choices, not just the ones the unions believe are the ones that best serve their own interests. And no scandals with unions ever? (Royal Commission?)
Breaking news :: Default life cover in industry super funds is a “scandal”. People actually pay and think they have life cover until they try to claim.
In further news…..Industry super funds should not have their own financial advisers. That can create bias and poor results for consumers.