Let’s not forget a simple fact. The estimated $1.7 trillion sitting in superannuation accounts does not belong to banks or fund managers or to industry funds or to financial planners.
It’s worth mentioning this every now and then, because more and more often it seems that a conga line of financial institutions, financial planners, advisers and others carry on as if they actually do own that money. Even though these entities are fond of quoting funds under management or other measures of their size, the fact remains that they don’t really “own” very much at all.
It’s also worth remembering that the financial services sector in Australia didn’t get as big as it is solely on merit, nor because it’s necessarily great at everything it does. Some of what it does is world class, that is true; but its size and its influence is due in significant part to the growth in superannuation assets – that is, something handed to it on a silver platter, not something it created for itself.
This piece of extreme good fortune doesn’t stop the sector from having an inflated sense of its self worth and of its proper place in the pecking order. That is evident in episodes of poor behaviour and disdain for the rights and the wellbeing of the people it is notionally meant to serve (that’s the “services” bit in “financial services”).
The $1.7 trillion belongs to ordinary Australians, millions of them, and financial institutions are merely conduits for that money. It is not theirs. But too many people have learned to their detriment that you stand between your own savings and a rapacious financial institution at your peril. And in recent discussions about regulation and compensation, the rights of the people who own the money have routinely been placed behind the interests of others.
A big part of the government’s justification for amendments to the Future of Financial Advice (FoFA) is to reduce red tape on business. Consumer protection will also be reduced as a result of the changes, but not by too much. It’s a balance, you see – as if the protection of the people who own the money is equivalent to, or can be traded off against, the business efficiency of those who seek to make a living off them.
The problems at Commonwealth Financial Planning (CFPL) started when the interests of some of its financial planners were put ahead of the clients those planners were meant to serve. And having created that problem, part of the Commonwealth Bank’s justification for not moving faster and further than it has to compensate clients is that it has the interest of 800,000 households at heart – households who own CBA shares.
The interests of individuals are being traded off against “business”, against the enrichment of individual financial planners, and against bank shareholders. At some point someone has to stand up and say that the most important people in this saga are the people who own the money. Not financial planners. Not financial planning businesses. Not the banks. And not the banks’ shareholders.
You might think that the first responsibility of a democratically elected government is to protect its own citizens. All of them. When it comes to superannuation, we’ve created a compulsory regime with a very complicated set of rules. People who see advice on how to negotiate those rules should expect they will be protected against crooks and charlatans and the merely incompetent.
There has to be a significant compliance hurdle for all individuals and businesses that want to provide services to people who are saving to become financially self-sufficient. And if one side in the relationship has to be favoured over the other, surely it should be the individuals?
The government doesn’t get that. Some financial planners still don’t get that. Some institutions don’t want to get that. That’s why individual protections can be watered down under the pretence of reducing red tape. It is why CBA is currently sinking in a mess very much of its own making, and why its response has been labelled as too little, too late.
We refer to CBA’s financial planning arm as CFPL to avoid casual confusion with the term Certified Financial Planner, or CFP, which is recognised as the highest professional designation attainable by a financial planner. There are more than 140,000 CFPs around the world, including more than 5700 in Australia. There’s a certain irony in the fact that if all of CFPL’s planners had also been CFPs, it’s a fair bet the bank would not be facing problems of the current magnitude.
