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AUSTRALIA

The things you can't get for free

  • 24 November 2014

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.
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