The finger of blame

Sometimes a statement is so bizarre that you have to read it again to make sure you got it right the first time. Occasionally the statement remains odd on the second reading. And then there are statements like the one made this week by former Treasurer, Peter Costello, about contributions to superannuation prior to July 1 last year, which remain weird no matter how often you read them.


Costello was quoted in The Australian today to the effect that it was financial planners’ fault that there was such a great rush of money into superannuation – an estimated $15 billion in the months and weeks before the June 30 deadline – and that they are consequently accountable for the fall in the value of those contributions during the current global market turmoil.

“Big push by whom? Financial advisers? Maybe,” Costello said. “I’m sure if you went around to some financial advisers you could find people who did push that. I’m sure you could. I’d make inquiries of financial advisers.”

And later: “The government didn’t encourage it – anybody who wanted to put money into superannuation was free to do so. It’s their investment decision.”

I beg your pardon? Didn’t encourage it?

Remember the big rush to contribute to super last year? It came in response to changes to the rules – introduced by Costello, of course – that lifted the contributions limit to $1 million, for some people.

What did Costello think was going to happen when he introduced the changes? Nothing? Yeah, right.

It took the Minister for Superannaution And Corporate Law, Senator Nick Sherry, to point out today that on  July 1 last year Costello said:

“There is no doubt there has been a huge flood of money into superannuation - and the greatest flood of money into superannuation ever. That is actually a good thing.

“We knew that there would be an amount that would go in and we wanted to encourage it.” 

Of course, with the benefit of hindsight, it was not a great time to invest in the sharemarket – so if those super contributions found their way into equities, they’d be looking a little sick today.

But planners cannot be blamed for advising clients to make substantial contributions under the new rule, any more than Costello can be blamed for introducing the new rule in the first place. If Costello holds planners responsible, then he must accept some responsibility himself. 

Costello changed the rules; planners advised clients how to exploit the rules; now everyone is pointing the finger at everyone else and saying “It’s not our fault.”

They’re right. No one foresaw the firestorm that engulfed global markets – not even our erstwhile Treasurer. No one could foresee it. Provided the advice given was appropriate at the time, given each client’s circumstances, goals and resources, then the planner’s duty has been properly discharged. End of story.

For anyone to turn around now and say, “Yeah, but now the market has tanked, so you should never have advised me to make the contribution in the first place”, is inappropriate.

For Costello to point the finger of blame at financial planners is ludicrous.