Financial confidence takes a hit

Two contradictory things happened in the world of finance yesterday. Just as the Murray Financial System Inquiry called for improved financial advice, the Senate voted to tighten the hold of the big banks and AMP on retirement savings.

David Murray delivered the interim report by the Financial System Inquiry early afternoon. Despite the fact he is a former banker – Mr Murray was previously head of the Commonwealth Bank of Australia (CBA) – chairing the inquiry, this was not a whitewash. In fact the interim report poses frank questions about our current system and the main players.

The inquiry, which was established in by the Abbott Government, is the first since the Wallis Report in 1997 to investigate the sustainability and security of our financial sector.

Rather than recommendations, the interim report contains a list of challenges to our financial system and related options, including staying with the status quo. The Inquiry is requesting further feedback in order to form a final report, with recommendations, to be released in November this year.

The key observations for retirees include confirmation that Australian superannuation fees are far too high and that this reduces the final retirement incomes of ordinary Australians, note of the challenge placed on investors by financial complexity and the need for confidence in retirement outcomes. The inquiry noted that its report was finalised before the Senate enquiry into ASIC but had uncovered similar challenges facing the regulator.

Early evening in the Senate saw the passing of a watered down reversal of the Future of Financial Advice (FoFA) legislation previously introduced by the Labor Government. In a shift from its original stance, which just last week was leaning towards the rejection of the FoFA reversal, the Palmer United Party requested four extra conditions be attached to the bill before voting it through the Senate, in partnership with the Abbott Government.

Consumer advocacy group, Choice, expressed disappointment at the repeal of FoFA, stating

“This rollback includes watering down the duty of financial advisers to act in the best interests of their clients, and removing the requirement for advisers to obtain the agreement of consumers in order to keep charging them fees.”

CHOICE CEO Alan Kirkland noted:

“ Today, the Senate has failed the best interests of consumers, and failed to learn the lessons of repeated financial advice scandals and collapses, where Australians have lost their life savings,”

Read the full 460-page interim report here (it’s actually quite readable!)

Read why CHOICE did not want this legislation repealed


Opinion: Retirees deserve better

If ‘The Age of Entitlement’ is really over and we all have do our own heavy (financial) lifting – why don’t financial planners have to be accountable by acting in their clients’ best interests?

Yesterday was a big day, by any standards, when it comes to financial matters in Australia. First came the Financial Services Inquiry interim report, with a surprisingly objective (given the makeup of the panel) take on the challenges facing our financial sector. True, former banker, David Murray, was bending over backwards to please the big banks with a view that they are ‘not uncompetitive’ (note the double negative). But by and large the 460-page report displayed a comprehensive summary of the potential pitfalls ahead for our finance system and raised many useful options and questions about how these pitfalls might be addressed.

But the good times were bound not to last. Despite his avowal to support the blocking of an attempt to repeal the FoFA legislation, Mr Palmer allowed his party to be talked into a bandaged bill which means that financial planners and the big banks can relax – they will not really be held accountable after all.

In the wake of the collapse of Storm Financial and fraudulent behaviour by CBA planners, followed by a Senate inquiry which slammed the soggy response from ASIC, as well as advocating the need for a Royal Commission into the CBA, we now have a Federal Government dismantling legislation which holds planners to account. Research indicates that fewer than 50 per cent of Australians trust financial planners and 75 per cent believe we should have a Royal Commission into the CBA. Despite this lack of trust and call for action, we now have legislation which gives a green light to the practices which have allowed this profession to sink into disrepute – along with the evaporation of the savings of thousands of Australians. Seriously? Is this the best we can do? If Mr Murray’s panel can see the need for a more rigorous retirement saving and investment system, why can’t Mr Hockey and Mr Cormann? Australian retirees are being told they are on their own when it comes to funding their retirement. They are being told to work longer and do their own heavy lifting. When it comes to financial regulation, they deserve better.

What do you think? Is our retirement savings system a secure one? Do you, or would you use a planner?

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