The things you can't get for free


Free Lunch sign

In a surprise move during the week, Senators Jacqui Lambie and Ricky Muir joined Labor, the Greens and other independents in passing a disallowance motion that reverses changes that watered down Future of Financial Advice (FoFA) legislation that was designed to protect consumers.

In 2012, Labor enacted the original legislation that put an end to commissions and bonuses linked to the sale of financial products recommended by financial advisers. Financial advisers were banned from receiving commissions and instead needed to charge clients – rather than the big banks – a fee for their services. 

For a short time, consumers no longer received ‘free’ financial advice. But they could be more trusting of their advisers because, like anybody in business or the professions, financial advisers look after the interests of those who pay them. This was now consumers rather than the big banks. 

But unsurprisingly, the banks were not happy with this, and successfully lobbied the Coalition Government to weaken Labor’s consumer protection legislation. The Government was able to put the banks’ wishes into law as soon as Finance Minister Matthias Cormann could persuade Clive Palmer to reverse his opposition to diluting Labor’s protections.

The battle between big business and consumer advocates over who gets to pay financial advisers has broader implications for the provision of professional services in the community, particularly in health and education. It reaches into the important issue of public trust.

A few years ago leading educators endorsed the practice of companies such as McDonald's funding numeracy and literacy programs in schools because governments did not have the funds that were needed. It goes without saying that school principals and teachers will avoid doing anything to offend those who are paying for their programs, at the very least. In all likelihood, many will put in a good word for McDonald’s, or whoever is providing sponsorship funds.

Corporate ‘partnerships’ with schools and other other organisations providing human services, such as welfare agencies, are now common. It is true that these sources of funding enable a lot of good to be done. But at every point it has to be asked who is calling the shots. The companies would not be in it if their involvement was not demonstrably serving their bottom line. Otherwise their shareholders would have good reason to revolt.

Now that cuts to the ABC are being announced, we are reminded that it is Australia’s most trusted media organisation and public opinion leader. The reason is simple – the public is paying for it. Its charter, management and staff have always been fervently opposed to sponsorship. If the ABC ever accepts advertising or other forms of sponsorship, trust will be eroded.

We need to recognise the importance of instilling and maintaining trust in all our public institutions and professional practices so that they serve the interest of the community ahead of that of big business. They're worth paying for.

Michael MullinsMichael Mullins is editor of Eureka Street.


Topic tags: Michael Mullins, FOFA, financial advice, corporate sponsorship, ABC, trust, professionalism



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Existing comments

It always amazes me that the current Coalition Government is so keen to do the bidding of the Big End of Town. Perhaps they are completely overwhelmed by people like Gail Kelly, a very powerful personality indeed. R G Menzies was never like that: he realised his power came from the little people. It is ironic that the passing of FoFA, seen as a done deal by Matthias Cormann was stymied by Jackie Lambie and Ricky Muir - the sort of "little people" i.e. normal everyday Australians who the professional politicians are given to despise. Perhaps the tocsin has sounded. Perhaps the government don't have the bogus "mandate" to ramrod through legislation such as this. Perhaps the wheels are coming off Abbott's chariot? I do hope so.

Edward Fido | 23 November 2014  

...and we are quietly reminded of the age-old maxim: He who pays the piper, calls the tune.

Bob | 24 November 2014  

Many years ago I studied management for not-for-profit organizations. The convenor of our Fundraising unit was passionate about the dangers of 'funder capture'. The more money Acme Dogfood put into your Lost Puppies Home, the more control they'd have of your policies, one way or another. Now we have education, financial services and who know what else being captured by the Man with the Money. Thank God for the Senate......

Joan Seymour | 24 November 2014  

If we are to be concerned about who is paying whom for what,we should ask if the Industry Funds were driving the Labor legislation.There seems to be a vested interest here to promote the income paid to unions,the different accounting standards and cosy appointments.I may not vote for the current government but they may just get some things right. Was the Lambie /Muir vote really about FoFA?

Chris | 24 November 2014  

It wasn't too hard to work out what was motivating the Liberals, to the extreme detriment of those like me who need the services of a financial adviser.

Eric | 24 November 2014  

The FoFA provisions, now reinstated, were designed simply to ensure that the life savings of people seeking honest financial advice were not prejudiced by advisors acting in their own interests. The government was removing that protection. So whose interests was the government serving?And why was the media not loudly condemning this injustice? We should be grateful to consumer advocates such as Choice and National Seniors Association.

Peter Johnstone | 24 November 2014  

"Cui bono?" what a great question to ask where the freeing up of financial advisers was concerned! How the government thought they could get away with loosening the restraints on financial advisers who had grossly mis-served Mum and Dad retirees baffles me? The behaviour of the banks didn't surprise me, focused as they were on the bottom line, and pity help the collateral damage. Clive Palmer lost my respect on this issue/ And the little Burnie Battler, Jackie Lambie, earned my admiration as someone who's learning on the job.

Uncle Pat | 26 November 2014  

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