Banks land $3b wind­fall

Goug­ing cus­tomers, charg­ing the dead, dis­as­trous ad­vice. Now...

The Sunday Telegraph (Sydney) - - NEWS - ANNIKA SMETHURST

THEY have been ham­mered in the royal com­mis­sion all week for sins in­clud­ing goug­ing dead cus­tomers and giv­ing dis­as­trous ad­vice — and now Aus­tralia’s Big Four banks stand to reap an un­ex­pected $3 bil­lion wind­fall over the next decade from the fed­eral govern­ment’s planned tax cuts.

New mod­el­ling shows that by 2027-28, when Scott Mor­ri­son’s planned big-busi­ness tax cut is fully im­ple­mented, the Big Four banks will net $3.7 bil­lion more in tax sav­ings than the $9.5 bil­lion orig­i­nally pro­jected over the first 10 years of the pol­icy.

By ex­tend­ing the im­pact of the tax cut to 2027-28, the anal­y­sis — based on data by the Aus­tralia In­sti­tute — re­veals the Com­mon­wealth Bank would be the big­gest win­ner, with a fore­cast $4 bil­lion tax cut over the next decade. West­pac and ANZ will be more than $3 bil­lion bet­ter off un­der the pro­posed tax rates and NAB would bank an ex­tra $2.6 bil­lion.

La­bor has seized on the lat­est data — which ex­tends the cost of the tax cut to the last year of the medi­umterm — to ramp up its cam­paign against the com­pany tax cut.

The govern­ment has al­ready passed leg­is­la­tion to lower the com­pany tax rate for busi­nesses with a turnover up to $50 mil­lion.

The Se­nate is cur­rently re­fus­ing to pass leg­is­la­tion that would ap­ply a rate of 25 per cent to all busi­ness, in­clud­ing banks, by 2026-27.

Some Coali­tion back­benchers and cross­bench Sen­a­tor Der­ryn Hinch are lob­by­ing for Aus­tralia’s ma­jor banks not to re­ceive the tax break fol­low­ing damn­ing rev­e­la­tions that have emerged from the royal com­mis­sion.

Act­ing Op­po­si­tion Trea­surer Jim Chalmers said it “beg­gars be­lief” that the Turn­bull govern­ment would re­ward banks after the “rorts, ripoffs and scan­dals which has sur­faced dur­ing the royal com­mis­sion”.

“These new fig­ures show the four big banks stand to be the big­gest ben­e­fi­cia­ries of the tax cut,” Mr Chalmers said. “While vic­tims are try­ing to put their lives back to­gether, Turn­bull and Co are re­ward­ing the banks.” SINS OF THE BANKS PAGE 39 LOCK UP THE THIEVES: SCOTT PAPE PAGE 98

LIKE the dra­matic end­ing of a tele­vi­sion mys­tery, the fi­nan­cial ser­vices royal com­mis­sion hear­ings have un­masked the banks as vil­lains.

But ex­perts be­lieve there are more hor­ri­fy­ing rev­e­la­tions to come.

Al­ready we have learned Aus­tralia’s big­gest bank charged dead peo­ple fi­nan­cial ad­vice fees for a decade and the na­tion’s big­gest fi­nan­cial plan­ning com­pany ad­mit­ted to rip­ping off its cus­tomers and ly­ing to the cor­po­rate reg­u­la­tor about it.

Ev­ery­day Aus­tralians have told of los­ing ev­ery­thing after re­ceiv­ing dodgy ad­vice from so­called pro­fes­sion­als they trusted.

The pub­lic sham­ing will con­tinue as more se­nior ex­ec­u­tives an­swer ques­tions. Res­ig­na­tions have be­gun and tougher new laws an­nounced.

Fi­nan­cial ser­vices in­dus­try in­sid­ers said cus­tomers have been get­ting ripped off for years, and hope this royal com­mis­sion will fi­nally bring change.

Deakin Busi­ness School’s Adrian Raftery likened the hear­ings to a re­al­ity tele­vi­sion show. “It’s been riv­et­ing TV watch­ing them squirm,” he said.

“I’m still scep­ti­cal that all has been re­vealed. The in­dus­try is dis­ap­pointed but not overly shocked, which means a lot of peo­ple are not dis­clos­ing ev­ery­thing they should.”

WHAT’S HAP­PENED

Pub­lic hear­ings for the royal com­mis­sion be­gan in March and first fo­cused on con­sumer lend­ing but things heated up last week when two weeks of hear­ings about fi­nan­cial ad­vice kicked off.

Aus­tralians have heard out­ra­geous ex­am­ples of money- grab­bing. A Com­mon­wealth Bank sub­sidiary re­vealed it had been charg­ing on­go­ing fi­nan­cial ad­vice fees to cus­tomers who had died years ear­lier — one had been dead at least a decade. The bank also agreed it was the “gold medal­list” in charg­ing cus­tomers for ad­vice they never re­ceived.

AMP also charged “fees for no ser­vice” and ad­mit­ted to ly­ing to cor­po­rate reg­u­la­tor ASIC many times and al­ter­ing a so-called “in­de­pen­dent re­port” into its be­hav­iour.

Nurse Jac­que­line McDowall told how bad ad­vice from a West­pac fi­nan­cial plan­ner to bor­row up to $2 mil­lion and start a self-man­aged su­per fund had cost her and her truck driver hus­band Hugh their home.

Banks said they fo­cused on prof­its in­stead of try­ing to fix sys­tems that de­tected when fi­nan­cial ad­vice cus­tomers were be­ing ripped off.

Na­tional Aus­tralia Bank staff fal­si­fied doc­u­ments in re­turn for cash bribes to get home loans ap­proved.

West­pac con­tin­ued to pay com­mis­sions to car deal­ers for loans that ASIC had al­ready moved to ban.

Given the up­roar and scale of the find­ings so far, Fi­nance Min­is­ter Mathias Cor­mann said he would ex­tend the royal com­mis­sion’s length be­yond 12 months if re­quired.

WHAT DOES IT MEAN?

De­spite a pile of in­quiries and re­views of fi­nan­cial ser­vices in the past decade, prob­lems still per­sist and need to be fixed.

AMP chief ex­ec­u­tive Craig Meller fell on his sword on Fri­day, an­nounc­ing he would quit im­me­di­ately, after pre­vi­ously flag­ging he would be leav­ing later this year.

Trea­surer Scott Mor­ri­son, an­nounc­ing new rules that in­cluded huge fines and po­ten­tial 10-year jail t terms for badly­be­hav­ing ex­ec­u­tives, said the res­ig­na­tion ““doesn’t sur­prise me”.

“It’s not just e ex­ec­u­tives here. Boards a at the end of the day are re­spon­si­ble for these or­gan­i­sa­tions,” Mr Mor­ri­son said. “Equally, ASIC has a job to do and I have no doubt that as this process un­folds there will be crit­i­cisms lev­elled at ASIC.”

Dr Raftery said the rev­e­la­tions showed there was “a big cul­tural is­sue at stake, from the top down” and also crit­i­cised ASIC’s role.

“To have a large or­gan­i­sa­tion say un­der oath, ‘I have lied to the reg­u­la­tor and that in­de­pen­dent re­port wasn’t re­ally in­de­pen­dent be­cause we de­signed ques­tions’ … I’m re­ally dis­ap­pointed in the bite of our cor­po­rate watch­dog,” he said.

Chris Brycki, who founded on­line in­vest­ment firm Stockspot in 2013 after find­ing peo­ple were be­ing charged high fees for bad ad­vice, de­scribed some of the rev­e­la­tions as “un­be­liev­able”.

“It’s all com­ing out now but it’s been clear for a long time to me that the typ­i­cal ad­vice peo­ple get when it comes to in­vest­ing is ter­ri­ble,” he said.

“It looks pretty bad for those politi­cians and busi­ness lead­ers who were ad­vo­cat­ing for there not to be a royal com­mis­sion.”

WHAT HAP­PENS NEXT?

NAB, ANZ, ASIC and the Fi­nan­cial Plan­ning As­so­ci­a­tion are among those sched­uled to ap­pear be­fore the com­mis­sion in the week ahead.

The new laws un­veiled on Fri­day in­clude fines of up to $210 mil­lion, or 10 per cent of a com­pany’s turnover, and stronger pow­ers for ASIC.

The fi­nan­cial ad­vice in­dus­try will go through a pe­riod of up­heaval, with an es­ti­mated 8000 of its 24,000 plan­ners set to re­tire by 2023, cre­at­ing room for fresh blood that can per­haps res­tore trust in fi­nan­cial ad­vis­ers.

There have been calls — in­clud­ing from for­mer com­pe­ti­tion watch­dog Al­lan Fels — to sep­a­rate fi­nan­cial ad­vice busi­nesses from the banks be­cause they can’t man­age con­flicts of in­ter­est. Mr Brycki said fu­ture changes should hope­fully make peo­ple more com­fort­able about get­ting fi­nan­cial ad­vice. He agreed with tough jail terms for rule break­ers.

“Un­less those in high po­si­tions at the banks see there are ram­i­fi­ca­tions, this be­hav­iour is likely to con­tinue,” he said. “They’re all blam­ing ‘cul­ture’. But cul­ture doesn’t go to jail — it’s just an ex­cuse.”

Linda Elkins from the Com­mon­wealth Bank, which re­vealed it had been charg­ing fi­nan­cial ad­vice fees to cus­tomers who had died years ear­lier. Pic­ture: Stu­art McEvoy

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