Savers and investors have good reason to be upset learning through the ongoing proceedings of the banking Royal Commission how ineffective the corporate regulators have been in protecting them from the worst excesses of the sales-driven financial institutions. Consequently, many individuals have been left owning insurance, superannuation and other products where the largest returns have accrued to the sales people and the issuing institutions.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Even clear breaches of the laws governing unsolicited marketing and informing customers of their rights have, until the latest revelations, gone unpunished. The regulators for some reason or other have either been out of touch with or not concerned about the treatment of unaware or poorly informed customers.
Hopefully, the Royal Commission will be recommending major changes to help and protect all investors.
Clearly, it’s time for the policy bureaucrats and regulators to dirty their hands and become involved with what’s happening out in the real world. Enacting legislation is one thing, making sure it’s effective and works in practice is a totally different and more important issue.
Consider the case of compulsory superannuation which when introduced and still today is not supported by measures to ensure that the compulsory payments are actually made or that all employees receive tangible benefits from their forced savings. Without both these protections, the potential benefits of this major initiative won’t be fully realised.
Instead of leaving individual workers to pursue the many instances where employers shirk their obligations, the government could use the Pay as You Go mechanisms to check that the required super payments have been made, collecting missing contributions directly from the employer.
The simpler the calculation, for instance, 9.5 per cent of the gross wage for the period compared with the current complicated formula, the easier it would be for the ATO to ensure the money is actually paid. Similarly, ensuring that the payments are efficiently invested with changes including a government approved fund such as the Future Fund which people could use as their default fund would help address the issues of excessive fees and charges revealed by the Royal Commission.
Given the difficulty many people face in obtaining and evaluating financial advice, ASIC’s recent information paper on reverse mortgages for retired homeowners is a trail blazing document. This easily accessed document sets out clearly all the issues including the risks involved for potential users to be aware of.
The disappointing fact is that similar documents have not been prepared and distributed on topics such as choosing a superannuation fund, assessing the needs for insurance and taking out a mortgage. Compared with the relatively small market for reverse mortgages, these topics and many others are relevant to millions of Australians.
Daryl Dixon is the executive chairman of Dixon Advisory
