Consumer advocates from across the globe have collaborated to report on the global cost to consumers from toxic banking practices such as inappropriate sales incentives. The report comes as the Australian Senate is set to vote on the Bill to finalise the removal of financial advice protections in Australia
“From Australia’s Commonwealth Bank to Bank of America, Washington Mutual, Lehman Brothers and DSB Bank in the Netherlands, risky banking practices continue to hurt consumers around the world and we need to be strengthening protections, not removing them,” says CHOICE CEO Alan Kirkland.
“The global banking system is littered with inappropriate sales incentive schemes which form part of a toxic banking culture promoting high risk and short term gains ahead of consumer interests,” says Mr Kirkland.
“This latest report from Consumers International adds yet more weight to the body of evidence that shows why we should maintain financial advice protections in Australia, not scrap them.”
CHOICE says that the Senate is due to vote on legislation that would be the final nail in the coffin for financial advice protections in Australia as soon as tomorrow. The consumer group is calling on Senators to take the most responsible course of action, consider the evidence and delay the vote.
“In the next month we expect the Financial System Inquiry, a once in fifteen year review of the Australian financial system, to report,” says Mr Kirkland.
“The Inquiry had a close look at financial advice in its draft report and is expected to deliver a comprehensive take on the problems in its final report in November.
“The FoFA regulations introduced in July this year require a change in legislation but not until the end of 2015. So, it’s fair to ask, why the rush to kill consumer protections?” says Mr Kirkland.
CHOICE says the legislation will affect millions of Australians by making it more difficult for them to get independent, trustworthy advice that is always in their best interests:
- The legislation waters down the obligation that an adviser should act in their clients’ best interests;
- It reintroduces some types of conflicted remuneration; and
- It removes protections for existing clients of advisers so more people will unknowingly continue to pay fees for no service.
“Sales incentives in banking have already cost consumers billions of dollars, and it’s why we’re urging the Senate to wait for the Final Report of the Financial System Inquiry,” Mr Kirkland says.
“The findings of this latest international report should leave the Government in no doubt that removing financial advice protections is not the right course of action.”