Senator the Hon Mathias Cormann
Minister for Finance
MARK COLVIN: The Federal Government has denied caving into the big banks by rejecting calls for a Royal Commission into a financial planning scandal at the Commonwealth Bank. Instead the Government’s backed a Senate inquiry’s call for a public register of financial planners. Business reporter Sue Lannin.
SUE LANNIN: The financial planning scandal at the Commonwealth Bank has tarnished not just the bank’s image but the image of the corporate regulator, the Australian Securities and Investments Commission. In June, a Senate inquiry recommended that a Royal Commission be held into the scandal. That’s now been formally ruled out by the Federal Government. Instead it will set up a national register of financial planners, detailing their qualifications and any bans they may have received. Finance Minister, Senator Mathias Cormann.
MATHIAS CORMANN: What it will do, it will improve the publicly available information. It will improve transparency. It will empower investors to review information about their financial adviser to ensure they know who they are, they know what their status and their credentials are in the industry, what their qualifications are, who they work for and whether there have been any issues in relation to their performance in the past.
SUE LANNIN: But isn’t it just window dressing? Is it putting the emphasis on the financial planner rather than the employer who might be pushing the adviser to take risks?
MATHIAS CORMANN: It is not window dressing at all. This is a tool to empower customers, investors in particular, people across Australia, that as they consider approaching a financial adviser, they will have the opportunity to review relevant information about that adviser in terms of his credentials, in terms of his qualifications and so on.
SUE LANNIN: Jeff Morris worked for the Commonwealth Bank for five years as a financial adviser and blew the whistle on the scandal. He says a public register doesn’t go far enough.
JEFF MORRIS: It is implying that the whole problem is just the planners and it’s not. The problem is systemic. It was the management at CBA. It was the structure under which they operated. It was the vertical integration of this industry, whereby the product manufacturers like CBA use their financial advisers as a salesforce. To have a register of advisers, it’s buying this line of the problem is just a few rogue planners and it wasn’t. It’s the system that’s at fault.
SUE LANNIN: Mathias Cormann denies the Government caved in to the big banks by not setting up a Royal Commission.
MATHIAS CORMANN: We have had several enquiries now, Senate enquiries, other enquiries into these events and we don’t believe that yet another enquiry would add any more value.
SUE LANNIN: Are you satisfied with the Commonwealth Bank’s handling of this scandal? For example it hasn’t written to all of its customers, it says it doesn’t have the records, yet Macquarie Group was able to write to its customers?
MATHIAS CORMANN: These are events that have taken place sometime in the past between 2003 and 2012. Commonwealth Bank did run a pretty comprehensive advertising campaign to make people aware of the opportunity. From where I sit I think that clearly if you are a former CBA customer or current CBA customer who feels that you have still some outstanding, unresolved issues, I think that you would be aware that you can take advantage of this opportunity.
SUE LANNIN: The Government’s changes to financial advice laws are currently before the Senate. Labor and consumer groups say the laws are being watered down because the requirements make sure that financial advisors act in the best interest of the client has been narrowed. Mathias Cormann rejects that.
MATHIAS CORMANN: We do not accept that at all. We are being totally focused on the consumer’s best interest. What we need to balance very carefully is the need to have a robust regulatory system but also an efficient regulatory system in place, which doesn’t impose excessive costs.
MARK COLVIN: Finance Minister Mathias Cormann ending that report by Sue Lannin.