Unusually, the polity is currently all on the same page on the regulation of financial services. The government admits it should have called the royal commission earlier. The penalties for breaching corporations law are to be strengthened. The Australian Securities and Investments Commission (ASIC) is recognised as gutless. The regulation of financial advice, and the role of the big banks in the provision of advice and wealth management services, is agreed to have been inadequate.
It’s taken a lot of pain, wrecked lives and blatant criminality by not merely financial planners but some of the country’s biggest companies to get here. And that’s why a lame admission from the government that it waited too long isn’t anywhere near enough.
The Liberal Party has known for years what is wrong with the financial planning industry. It knew about the rip-off, by financial planners, and the role of the big banks, as far back as early 2009, when Labor’s Bernie Ripoll convened a joint committee inquiry into the role of the financial services sector and the collapse of Storm Financial and other outfits. It spent nearly a year examining the industry and produced a rare unanimous report.
They knew — but at every stage, the Liberals fought tooth and nail to protect financial planners and the big banks, not ordinary Australians.
The role of the Liberals in trying to thwart Labor’s Future of Financial Advice (FOFA) reforms in 2012, and then in trying to reverse the reforms in 2013-14, is well-known — Crikey was the first outlet to raise the hue and cry about the repeal of FOFA snuck out by Arthur Sinodinos in the shadows of Christmas 2013. But that was only part of the Liberals’ campaign on behalf of the big banks.
In the 2014 budget, the Abbott government slashed $120.1 million from ASIC’s budget — around 12% of its budget and over 200 staff. That came on top of efficiency dividends slapped on ASIC by Labor as well. At that time, then-Labor senator Mark Bishop’s Senate committee inquiry into the Commonwealth Financial Planning scandal was exposing how utterly hopeless the regulator already was. In 2016, this crippled, spineless regulator, with powers and penalties that Scott Morrison now acknowledges were insufficient, was being touted by the Liberals, hilariously, as the “tough cop on the beat” that made a royal commission unnecessary.
Having failed to gut FOFA, but having gutted ASIC, the Liberals then went after their long-term enemy, industry superannuation funds, whom they constantly demonise as corrupt union-run funds. In early 2016, the Turnbull government asked the Productivity Commission to work out a way to end the dominance of industry super funds in default superannuation arrangements, a task being pursued by the big bank-run Financial Services Council. But that has yet to yield any result — the 2017 deadline for the PC’s report was replaced with a 2018 one.
So the Liberals opened another front, arguing that industry super funds — which are run by boards jointly appointed by employer groups and unions — should be forced to be more like retail super funds, with a legislated requirement for external, independent directors. Never mind that independent directors on the boards of the major banks and AMP had done nothing to prevent scandals, correct the longstanding underperformance of retail super funds compared to other super funds or stop related-party transactions between retail super funds and the big banks. Never mind that independent directors would be aligned with the interests of the finance industry, including fee-charging service providers, pressuring funds to outsource functions to the latter. As late as December 2017, the government was still trying to pass legislation imposing the retail super model on industry super funds.
At every stage, the Liberals have gone to the mat for the big banks and financial planners, prepared to remove regulations, cripple the regulator, attack their competitors — and prevent scrutiny via a royal commission. And they did it knowing exactly the kind of damage to ordinary Australians that was being inflicted by the shonks and spivs of the financial services sector. Everything the Liberals accused Labor of in relation to trade unions — being corrupted by their relationship with them, being willing to block scrutiny and help them operate outside the law, being at their beck and call — applied exactly to the relationship between the financial industry and the Liberals. The accusations directed at Labor and the unions were a perfect projection of what was going on on the conservative side of politics.
And ordinary Australians paid the price.
NEXT: The deep links between financial planners, the big banks and the Liberals
What do you think of Liberals’ culpability in the unfolding scandal? Send us your comments and letters to boss@crikey.com.au.
Oh, but haven’t you heard Bernard? Apparently this is still “all Labor’s fault”? One day, perhaps, the Libs might actually behave like they’re the party currently governing the nation, instead of being in constant Opposition Mode.
BT – thank you for pointing out that the most odious dishonesty from the LNP is ‘surprise’ at the evidence of exactly what they knew they had been protecting. But I doubt there will be an epiphany. What needs to happen? – 1) Increase penalties to 3-4 times the financial benefit of unlawful behaviour, not subject to any limits. 2) Dissolve ASIC and and reconstitute it with competent and courageous regulators. 3) Prosecute all those on boards and in management that have been responsible and imprison those found guilty. 4) Set up another RC into rent-seeking and dishonest corporate conduct.
Exactly right. And ban the phrase “culture change”. It’ll change pretty quick smart if those crims get prosecuted.
Sorry BeenAround, where in the wrong Parallel universe for any of this to happen. It’s a wonder the bookies are not taking bets, on the outcome, but I guess it will drag out for the next 10 to 15 years.
Hi Dennis. At least Hayne’s report will be a permanent record, the truth of which will be hard to suppress by future dishonest rhetoric and polemic from the business lobbies. While I simply do not buy the LNP being ‘surprised’, the power of this RC is that no Australian citizen can now plausibly claim the we have a ‘well-regulated’ banking and general corporate sector, the fairy tale peddled since bank de-regualtion in the 1980s.
The thought of a permanent RC – perhaps it could be called something like… FICAC – reminds me of a long running judicial enquiry onto beef export corruption in Ireland.
A couple of years ago the presiding magistrate opened the 22nd year of proceedings with musings on the death of the last of the major defendants and a handful of the leading barristers representing various interested parties.
Amongst other comments he said, “You, I, we have grown old on this matter, wasted untold millions and destroyed several major forests and none would pretend that we are any closer to resolution than what was known at the outset.”
And hopefully the media will never again let the NLP get away with claiming to be the ‘better economic managers’.
Don’t hold your breath waiting on that to happen, it won’t. With a few exceptions, the MSM stenographers write what their managers and the LNP tell them to. That’s why the furphy of “ LNP, better economic managers” exists. No questions asked.
And now the Australian media are going to rewrite history, ignore the last 10 years, and paint the Liberals as the great reformers of Australia’s corrupt financial sector.
Any lies will do as long as they get Turnbull in at the next election.
Of course they will, so many of them are as pro-big business and anti-union/ordinary great unwashed Australian pleb as this government. They only take an interest in we little people come election time when they need our vote.
Of course they will, so many of them are as pro-big business and anti-union/ordinary great unwashed Australian pleb as this government. They only take an interest in we little people come election time when they need our vote.
There’s a saying in politics that you should never launch a Royal Commission unless you know the outcome. I think in this case you can also reverse this, the Liberals didn’t want to launch a Royal Commission precisely because they knew the outcome.
On a related note, in the early days of the Abbott government they had “cut red tape” days where they celebrated getting rid of lots of regulations. It would be a nice project to go back and look exactly at the regulations they did get rid off and see what this has caused. No doubt there was plenty that could legitimately be gotten rid off, but I wonder if there are some in there that ended up causing, for example, people to lose a lot of money through dodgy financial services, or worse if some regulation they cut resulted in lower safety standards that caused injury or death?
A lot of the scams are in open and flagrant breach of existing laws and regulations, not caused by deregulationn. What we have is deregulation by stealth; regulations not enforced are seen by the scammers as optional.
Of course the Liberals knew, they ARE the big banks!