Hidden in plain sight in the parliamentary committee report into the Opes and Storm collapses and other financial services debacles is a remarkable cameo of how far an industry association will go to muzzle one of its own when they say something untoward.

On July 29, Julie Matheson sent a submission to the committee.  Matheson is an experienced financial planner who has been in the financial services sector for more than  20 years.  Matheson’s submission was highly specific, and very well thought-out.  She focused on the power relationship between financial advisers and the providers of investment “products”, who are all Australian Financial Services Licensees.

In Matheson’s view, there is an imbalance in the relationship.  AFSLs control the amount of training that financial advisers get, and in many cases confine it to the selling of the AFSL’s own products, without any capacity to compare them with other products.  AFSLs also control what fees and commissions advisers are paid.  The Corporations Act and associated regulations require planners to link with an AFSL, even if they are professional, skilled planners who can represent the interests of clients in negotiations with a range of product providers.

Matheson noted that AFSLs rely heavily on “capturing” large numbers of financial advisers, who provide a distribution network for their products.  Matheson used the example of AXA, which, since 2003, has hoovered up over 500 advisers via company acquisitions.  These advisers, who notionally are supposed to advise clients about the best wealth management options open to them, are, in effect, the distribution network for AXA and similar companies, most of them controlled by the big banks.

Matheson recommended that the training of financial advisers be removed from the control of AFSLs and made subject to an independent professional body, that highly-skilled professional financial planners be allowed to de-link from AFSLs and, most significantly of all, that AFSLs be made to set up and fund a compensation fund for compensate consumers when their financial services products are shown to be faulty.

Some industry figures didn’t like what Matheson said.  The compensation proposal in particular would have galled plenty.

Mentioned in Matheson’s brief bio in the submission is one of her then-current roles: board member of the Financial Planning Association.  That is the only mention of the FPA in the submission.  Otherwise, the submission is clearly a personal one by Matheson, and has no letterhead, watermark or footer beyond “Submission by: Julie Matheson”.

In contrast to Matheson’s, the FPA’s submission suggested that professional associations such as  the FPA, rather than independent bodies, should be given a “co-regulatory” role over financial planners.

On  August 18, Matheson received a “private and confidential” letter from the chair of the FPA, Julie Berry, addressed “Dear Ms Matheson”, accusing Matheson of failing to fulfill her obligations to the FPA.

“As to your recent submission to the parliamentary joint committee on Corporations and Financial Services dated 29 July 2009, it is clear that some of your views are not supported or shared by the FPA.  However, you qualify yourself in your submission as a director of the FPA and you do not provide a disclaimer that this is a personal submission and that the views are not the views of the FPA.”

Berry accused Matheson of breaching the FPA’s charter, representing non-FPA and personal interests at the expense of the FPA’s, failing to notify the board of a conflict of interest, and possibly breaching the Corporations Act.  The board would be discussing possible “measures” it could impose on her when it next met.

Matheson contacted the committee and checked that they understood it was a personal submission.  The committee replied that yes, they knew it was a personal submission.  Perhaps the words “Submission by: Julie Matheson” gave that away.  She relayed that to Berry. The exchange of correspondence can be found here.

Thanks for “notifying” the committee that it was a personal submission, Berry told Matheson.  If she wanted to provide any other information before the board passed judgement on her, she could do so.

Unfortunately for the FPA, the committee had taken notice of what it was doing.  Parliamentary committees, regardless of what side of politics runs them, take very seriously the issue of how witnesses and people who make submissions to them are dealt with afterward.  On  September 14, Bernie Ripoll wrote to Berry.

“The committee has considered your letter to Ms Matheson, and your subsequent email, and I am writing on behalf of all committee members to advise you that your correspondence may constitute a contempt of Parliament and a criminal offence on your part… as well as on the part of other senior FPA personnel who were party to the decision to write to Ms Matheson.…”

Penalties for interference with or molestation of witnesses, Ripoll noted, included fines or imprisonment of up to six months.

That prompted a slight change in Berry’s tone toward Matheson.

“Dear Julie,” she began brightly (“Ms Matheson” no more) in a letter sent exactly 24 hours after the Ripoll letter.

“I withdraw my initial letter to you dated 18 August and extend an apology to you… the Board will not discuss this matter, the Board will not review your conduct nor will you suffer any disadvantage as a consequence of your submission to the Inquiry.  It was never the intention of the FPA to hinder you in giving a personal submission to the Committee.  Nevertheless the apology is proffered and I hope you will accept it.”

Marvelous how temperate and easy-going colleagues become when the threat of jail time rears its ugly head.