CHOICE membership

Royal Commission into the Banking, Superannuation and Financial Services Industry

superannuation
banking
financial_services

#201

… banking system so concentrated it can boost profits without repercussions

Sounds like a good argument for a publicly-owned bank, to provide a little unfair competition. We could call it the Comm… errr. :expressionless:


#202

Guess whose fault ‘it’ is! Apparently not the banks according to the vested interests (and government?). ‘Evil’ seems to be quite acceptable in their minds, as long as it is kept out of clear sight.

edit: Apparently it is because of us, not just the RC, according to ScoMo.

https://thenewdaily.com.au/money/finance-news/2018/08/03/scott-morrison-calls-australians-better-consumers/


#203

The LNP have a long history of shooting the messenger in an attempt to side-step responsibility.

The constant resourcing cuts the LNP have imposed on all the regulatory bodies (and others), and their total trust in industry self-regulation obviously had nothing to do with the many debacles that are being uncovered does it???

The usual next step:- the LNP will trumpet how wonderful they are providing extra funding to bolster the failing regulatory bodies; which will still leave them well below where they were and still unable to function properly.


#204

I have had the same experience on a local front. Once upon a time there were big extractive companies that wanted to dig up the valley. I was talking to a member of the local Council about it and she admitted to being worried about the effect on property values, a contention consistently denied by the companies. I asked her what ought to be done about the problem. She replied that the greenies should stop their campaign against the miners as this publicity was how people found out about the proposed mines and that is what caused the damage. The problem was not that it was happening but that it was being talked about in public. She got elected again.


#205

The litany of unethical/illegal practices by the Banks and non industry Superannuation businesses continue to roll out of the Commission.

ANZ have admitted to taking about AU$2 Billion from having tellers advising clients to roll their Super into ANZ products. Worse than this was that many of those rolled over funds then performed worse than if they had not been rolled over. ANZ admitted the strategy was highly risky for the investor.

AMP also continued it’s dismal run in the Commission with one of it’s Cash Option funds returning a 0.39% NEGATIVE return over a three year period. The money would have at least earnt something just sitting in a bank account.

CommBank’s subsidiary, Avanteos kept charging deceased Superaanuants for around a decade. In 2015 they conducted a review and found the issue. Linda Elkins the Commbank Executive appearring at the Commission stated “On this review [2015 one], the conclusion we made was that the practice should cease and should never have occurred,”. However even after this the amounts were still being deducted up until recently.

NAB was reported by SBS to have done a similar practice on up to 4.100 dead clients and received about AU$3 million from the process.

It takes about 4 days from the date of the hearing before the transcripts are available so Wednesday’s will be able to be read on Saturday: If you would like to read the transcripts see:

https://financialservices.royalcommission.gov.au/public-hearings/Pages/transcripts.aspx


#206

The RC is a great eye opener. The issue is solutions. The issues of bad behaviour by banks, and most corporate entities, is decades old. Give a person power, and most will over time abuse that power. In summary the overarching issue is ‘confirmation bias’. A subset is ‘regulatory capture’, ‘cognitive dissonance’ and ‘for the greater good’.

What are ‘reasonable expectations’ in the commercial arena? Corporate executives are selected by Boards to achieve as close to maximum profits as possible. There are many social goods, often called intangibles, yet these are not the first order issues that either executives or Boards are required to consider. The interests of shareholders, increasingly Superannuation entities, are used/misused/subverted for the disproportionate benefit of executive and Board members. The previous decades have clear data showing an increasing proportion of corporate profits being diverted to this wilfully blind, insular and narcissistic group. Bonus arrangements for ‘performance’ and the subcontracting of recruitment, or selection criteria, have self fulfilling objectives. It can only be described as hypocrisy if you are NOT benefiting.

So are so-called duped customers completely innocent? IMHO, no. Customers approach financial entities for an outcome. Capitalism thrives on positive thinking. The customers that facilitated misrepresentation on loan applications never complained when the asset class increased in value. Reflection only occurs when outcomes are poor or ‘unexpected’. Blame must be fairly proportioned.

Regulators are ineffective due to the reward imbalances. Corruption is a risk managed calculation. The benefits are super-profits. The risks are low due to many issues including regulatory capture, yet significantly restricted by inadequate and out of date legislation. The intent for any legislation or regulatory barrier can be ameliorated by corporate lawyers within days. The speed and effectiveness of the response is proportional to the super-profits derived. There is no limit to human greed. Any Government or Legal barriers are mere window dressing that seeks to mask the problems to a level deemed acceptable by an uninformed majority. "Conflict of laws’ issues and multi-jurisdictional powers impede effective regulation. This subject is not compulsory in many law courses.

So, who has standing to comment? Banks are only as bad as society allows them to be. How many customers have read and heard of immoral behaviour compared to how many have taken the trouble to move their accounts, or reduce their involvement, with the BIG FOUR? Time to stop whining and do something practical. Move into not for profit credit unions and SMSFs. Geoff


#207

Maybe, but an article from 2018 states:

While APRA-regulated funds returned an average of 7.4%pa over five years to 2015-16 and industry super funds earned 8.8%, SMSFs with assets of $500,000 to $1 million really lagged with an average 3.7%.

The touted world of SMSF’s might not be a solution for everyone.


#208

For the hypothetical ‘sophisticated investor’ SMSF may work. There are also accounting and statutory obligations that require more than a basic understanding. The overheads of out sourcing this per advice I have previously received may also also need to be taken into account. A SMSF may not be a suitable vehicle for most smaller investors. There were many second tier small unregulated uncertified financial advisors pushing SMSF in our area. Many perhaps with a vested interest in being the middle person, taking a cut plus trailing commissions from sold on products.

My personal experience using industry super is consistent with the results per @TheBBG. My experience with some legacy super in a really really big private super fund also bears witness to them not being so fruitful. Needless this has since been transferred.

Those in the small family business world may use SMSF differently to traditional super and subsequently show lower rates of growth but gain benefits in other ways the average person cannot.

Dive in if you dare with your eyes wide open. Those I know who use them have substantial personal enterprises, individual and family trusts (more than one) and complex business arrangements. SMSF have been allowed to borrow funds to invest and take the tax benefit of the expenses and interest while using low taxed personal super contributions to kick them off. There has been a tightening of the regulations around these practices. Commercial and retail property is a common investment for SMSF. Growth in valuations over the prior decade or more has been low to negative which may help to explain part of the low rate of returns for the smaller SMSF. They are often not balanced investments which is a concern of APRA’s. The prospect of APRA acting more decisively may depend on which side of the political spectrum you consider most small SMSF users favour.


#209

Hi Mark, I am wondering what you seek to achieve with your response. Are you employed or otherwise connected with the Industry Super Funds? Strangely I have significant funds in the biggest. One of three Super streams, incly SMSF, and yes close to the $1.4 M maximum.

The main thrust of my response was to encourage folk to exit ALL financial institutions with self obsessed and overpaid executives. You have wilfully ignored any mention of banks - why? No mention of the behaviour of Boards. I would waterboard most of these otherwise well respected folk.

Small investors will continue to be shafted by the existing rules around Super. Other than negativity, what have you got to contribute? G


#210

The Royal Commission has identified behaviours by Executive and Boards in The Financial Sector that cannot be ignored and must be punished. The Executives and Boards in the Industry Funds are relatively better behaved than those run by the Big Four Banks. However, they are far from clean. I submit that the Executive class in Industry Super Funds are almost as narcissistic as their banking mates. I ask - why are you defending their behaviours?

It is intuitively obvious that SMSFs are not for everyone. In fact, useful for less than 20% of the population. I propose these vehicles as less Executives and Boards are involved. I am prepared to accept a lower return, merely so that less miscreants are rewarded for poor and unethical conduct. The whole premise of the Super Industry is hypocrisy for 70% of the population. Government wanted to reduce reliance on Social Security. The savings outcomes in Super accounts demonstrate that this intention will not succeed and about 50% of retirees will return to Social Security quite soon. The big winners were the salesman and Executives. The Royal Commission has shed a light on their behaviours. Geoff


#211

It may be wise for all to consider that many of Choice’s members only have small super accounts, may be in a specific industry or have limited knowledge of balanced investment options. Personal circumstances vary.

Personally I have no interest in the super or banking industry including any business that promotes or facilitates through fees delivery of SMSF to investors who are not sophisticated or experienced in developing balanced investment strategies for their retirement.

As a typical consumer I’m aware there are some businesses that promote SMSF to all. There are good and bad investment advisors. The same prudential oversight that is being taken to task re the banking and super industry giants is also the same body that supposedly keeps these businesses in check. I’ll suggest that these small financial services providers are just as likely to put their own interests first ahead of the customers they serve as has AMP and others per the Royal Commission.

For those that have the skills and knowledge and financial nouse there are opportunities to use an SMSF. It is no guarantee of being better off compared to an Industry fund. Many existing SMSF’s have very large million dollar plus balances.

Should we encourage other consumers to make fully informed decisions and act with caution on such a critical item as personal super?

The SMH says it all.

https://www.smh.com.au/business/banking-and-finance/why-small-smsfs-are-losing-money-20160609-gpf0al.html

On Credit Unions vs Banks I will make no comment as to relative merit. I can only say that in my past working life we thought we were lucky because our town had a bank. There are plenty of other sources of comparisons between all to enable each of us to make our own decisions.


#212

I’ll ask why you believe I had? You wrote an absolute in that

but later did well to quality it

We agree an SMSF is not suitable for those not equipped to manage them, nor those with fewer assets where compliance costs can eat into balances well beyond what fees in any other super vehicle might do. The average punter is ill-equipped to manage an SMSF and @mark_m wrote it well in that

and I struggle to see what I have added that went beyond the reality of highlighting returns per category as published.

While I mind being lied to and ripped off as many super funds and banks have (apparently proudly) done to their customers, I do not mind paying higher fees for better outcomes but the insidious arrogance from the entire super and banking industry was and remains nothing short of breathtaking.


#213

Hi Phil and Mark,

The corporate culture in Australia is trending dangerously close to the model dominant in the USA. I categorically reject this model. Capitalism is likely better, in efficiency terms, than a controlled or centrally planned economy in most situations. I prefer capitalism with a social conscience. That requires the worst aspects of capitalism, being unbridled greed, to be manacled. Only Government power that is well designed and targeted can achieve this lofty aim. Experience shows that G members can be bribed, emotionally captured and a plethora of other reasons for deviating from the moral high ground.

I believe that the customer retains some power. I promote and encourage most customers of the Big Financial Entities to move to more ethical and responsible competitors. Sadly that will affect the returns from two of my three Super arrangements. I am prepared to suffer this pain. However, it is likely that the moral fibre of these currently more ethical options will be tarnished over time. That is the conundrum of self interest and tribal support structures. I suspect that constant churn may be required.

My apologies, the plane to the Amazonian rainforests awaits. Sadly the more ecologically friendly options are not practical - I cannot walk on water. No worries, there are many commentators that believe they can.

Cheers Geoff


#215

Many years ago, I worked in a government department that dealt with super funds (among other things). I came to the conclusion that the vast majority of self-managed funds benefited the financial advisers far more than the clients. A great many self-managed funds were set up for purposes other than retirement income. Purposes which, when detected, were found to violate various laws and regulations.

I fear that Australian society in general is catching the US disease. I’ve heard it called Totalitarian Capitalism. But that’s getting off-topic.


#216

The ABC News website today reports that the Senior Counsel assisting the Commission has recommended that the CBA and NAB face criminal charges.

Hopefully the others will also get a guernsey. Could not happen to a nicer bunch of prize ********.


#217

Well, if anyone thought that it was a divisive week in politics, it was nothing in comparison to the division of public opinion regarding the banks following the revelations by the Banking Royal Commission.

On the one hand there are all those who consider the banks to be the greatest bunch of bottom-feeding grubs that God ever shovelled guts into.

And in the other camp are all those who just don’t like the banks at all.


#218

Oh, I didn’t notice the huge news that the RC agrees with everyone else that the banks and their super funds are corrupt… I was too busy… the Australian Prime Minister Saga VI took all my attention… I’d prefer more explosions and car races though, and more time to fill up my pop corn… and that Turnbull guy… apparently he does his own stunts! They’re doing another sequel too, but someone else, can’t remember who, is playing the top job.


#220

The ABC News website today has an article regarding switching banks.

There was also a Nielsen One Quick Question survey ad next to an article on the Google News website which I cannot link to.

It asks “when choosing a bank, which one do you prefer most.
CBA
NAB
Westpac
ANZ
Other”
Perhaps the question should be “when choosing a bank, which one do you dislike the most”


#221

Paul Clitheroe used to work for Channel 9, and now writes for the Herald Sun.
Its a common practice for employees of commercial organisations to publish factual information in a way which supports the aims and aspirations of the owners of the organisation.
In my view, the information in Paul’s article could be expressed as: “It costs money to ensure that a community’s vital infrastructure and institutions are properly regulated and that cost is shared amongs the members of the community”.
It’s my opinion that such a cost is likely to be less for most citizen’s than allowing poorly-regulated businesses to mecilessly gouge their customers.


#222

He used to do stand-up too but lost the gig. They have another comedian filling in now.

Australia my country, you have to laugh or you would do nothing but cry.