The Royal Commission into banking, etc, especial the national (compulsory) superannuation scheme , was the television feature of the week. Pamela Williams of the Oz has provided the best commentary yet, focussing on the moral issues. As she says: ‘In a nutshell, the wealth management industry has been ripping off customers by charging and keeping fees for which was not entitled’. A former NAB executive was asked by the Royal commissioner: ‘Did you think yourself that taking money to which there was no entitlement raised a question for criminal law?’ The hapless former executive answered: ‘I didn’t’.
Read Pamela William’s fine exposition here.
See also Anthony Khan’s fine set of articles under heading ‘Save our super’.
In the early 1990s I worked for two years as head of funds management in the mighty ANZ bank. With assistance from the Bank’s Chairman I employed a US-based acturial company to provide a service that provided access to funds of different risk levels. Funds with different levels were supported by Frank Russell’s expert opinion of global best fund managers. The Russell company also trained our large team of financial planners in how best to present the new offering to clients. Clients loved the new offering and within a short period we had raised a record amount of money, some from existing ANZ managed funds and the rest from new inflows. Profits were greatly increased, with far happier clients.
The inhouse fund managers fought this initiative like Kilkenny cats and the traditional bankers brought in a consulting firm that concluded the head of banking should include the fund management business in his portfolio. I had no faith in the head of banking and left with the substantial amount specified in my letter of offer. Within months the new management had ended the Frank Russell contract and resumed business as usual with poor (by global standards) internal fund managers with financial planners again flogging sub-standard product. Now, like NAB and the Comm bank, ANZ is in the process of offloading their hopelessly performing funds management enterprise.
With this background it was no surprise to see the shocking stories told to (or extracted by) the Royal commission, although ripping fees for years out of accounts of dead clients were an outcome I had never imagined. Clearly Australian banking has lost its moral compass, and it is also obvious that the Royal commission into banking and related businesses was well overdue. A highly credentialed company director recently said that she believed many large Australian businesses would have equivalent rorts. Many do not trust big business, which explains why cutting taxes on large companies is opposed by most Australians.
The NEG has received a provisional pass by State governments though there is expected to be some heavy opposition when the plan is debated by Liberal members of parliament. On the Insiders today, Josh Frydenberg asserted that the NEG would definitely improve reliability of power supplies and reduce energy costs as well as emissions of CO2. Many people do not believe this optimistic trifecta. There is a key question that must be asked and answered. ‘Exactly how will the NEG reduce CO2 emissions?’
And on the question of reliability of supplies, my guess is that the power companies do not wish to have cheap base-line power, as when supplies run short the companies can charge exorbitant fees. The single biggest insurance policy on reliability is for cheap baseline power run by the Federal government. Come to think of it, no frills banks also run by inexpensive bankers on the public payroll would provide a natural antidote to the fees gouging of Australia’s major banks.
Has privatisation failed? This is a worthy subject to debate it is unlikely to receive. So we at least need far tighter regulations. The government should announce that tax cuts for large business are off the agenda for the time being. Regulatory powers need to be strengthened, and in most cases it will consist of greater transparency about efforts of regulations. Some application of legal remedies would serve notice that regulators are fair dinkum.
Today we have two highly interesting reports. Fiona Prior reports from the new Louvre, Abu Dhabi.
And we are pleased to bring to readers Tim Tench’s 2016 talk about the British Bloomsbury Group, a partner to his recent piece on the American Algonquin Circle.
More exciting AFL games as the heavy hitters fight out places in the final eight. Last week’s five games settled by a few points will not be repeated for some time. But this weekend’s struggle between Hawthorn and Geelong was a stunner, and GWS prevailed over Adelaide , West Coast (lacking its suspended big hitter) subdued Port Adelaide, Collingwood beat the fast improving Lions, and Essendon outplayed St Kilda on Friday night. Sadly, North Melbourne were beaten by the Doggies, playing the best second half of football since the 2017 grand final. And Sydney beat Melbourne, whose finals place must now be under question.
Last game on the agenda was Freo vrs the Blues, … (To be completed only if an upset).
Image of the week - courtesy Eric Lobbecke