CHOICE has put its weight behind the growing calls for the government to provide more resources, rather than cuts to funding for the Australian Securities and Investment Commission (ASIC).
"Australia’s financial planning industry reads like a scandal rap sheet – CBA, Storm Financial, Great Southern, Westpoint, Fincorp, Trio, TimberCorp - which makes it even more alarming that less than two per cent of financial advice licensees will be subject to proactive surveillance by ASIC,” says CHOICE Chief Executive Alan Kirkland.
While ASIC has made it clear that it considers investigating rogue financial planners and practices a priority, the regulator concedes that staff cuts make this increasingly difficult. Planned government funding reduction will see ASIC staff numbers fall by 209 this financial year. On top of the $47 million ‘efficiency dividend’ imposed over the next four financial years (including the current one), ASIC will see a funding reduction of $120 million over the same period.
"By ASIC’s own admission [they’ll] only have resources to undertake active surveillance on each of the remaining 164 businesses with banking licenses in Australia once every 13 years,” says Mr Kirkland.
To date over 100,000 consumers have lost $5.7 billion to financial collapses in Australia.
The call by CHOICE to stop funding cuts forms part of its pre-budget submission to the government and comes just days before financial planning irregularities at NAB were revealed. Fairfax Media reported over the weekend that the bank had settled somewhere in the region of $10 million to $15 million with 750 customers who received inappropriate advice.
Several senators have called for a full royal commission into the entire financial planning industry. Calls for a royal commission following financial planning scandals at the Commonwealth Bank and Macquarie Private Wealth were rejected by the government, however, a group of crossbench senators consider the discovery of irregularities at NAB strengthen the argument for such an investigation. Nationals Senator John Williams said he hoped it would make some of his colleagues who had voted against a royal commission reconsider their position. "The few colleagues I've talked to are very supportive and the I'm confident the push for a royal commission will build, and build strongly," he said.
Independent Senator Nick Xenophon said he was concerned that because the NAB was compensating customers in secret it would mean that other consumers may not be aware of the need to revisit the advice they were given to determine if it was appropriate. "These financial victims are being re-victimised again by NAB undertaking these negotiations in secret," Senator Xenophon said.
Read more at CHOICE.com.au
Read more at SMH.com.au
Despite the push to shift the responsibility for retirement funding onto the individual, the government is gradually removing every safeguard available to the consumer.
The so-called burden of an ageing population is not one that the government plans to bear, of that we are clear. Although the legislation is stalled in the Senate, there are definite plans afoot to reduce Age Pension funding costs. And let us not be deaf to the rumblings that asset-rich baby boomers may see themselves with no government-funded benefits whatsoever. And while it’s easy to argue that this is indeed necessary to keep the country’s coffers healthy, the systematic reduction of consumer safeguards and the avenues for independent advice are counterproductive.
Cutting funding to the financial services regulator ASIC is foolhardy at best, but it is also likely to be increasingly damaging not only to consumers, but to an industry which is seen as one of the very few with the ability to flourish under current conditions. For every trustworthy planner correctly plying their trade, we’re led to believe are several more just waiting to fleece you of your hard-earned cash. Until a full-blown royal commission is held, why should we believe otherwise? It certainly pays to be cautious.
In a little-publicised move, the National Information Centre on Retirement Investments (NICRI) will cease to exist this week. For the last 25 years NICRI has provided information free of charge to retirees and pre-retirees on investment matters such as aged care funding, Centrelink benefits, financial planning strategies, financial counselling and more. Following the removal of government funding, the organisation will no longer be providing this valuable service.
Balancing the budget of the nation is obviously important, but when it puts at risk the financial future of every individual who needs qualified, independent financial advice to ensure they can fund even a modest retirement, a little more thought and planning by the government is clearly required.
Were you aware that NICRI is closing due to the removal of government funding? Do you think there should be a royal commission into the financial planning industry? Are you reluctant to see a financial planner due to the failings of the industry in general?
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