Show Me Then I’ll Believe

I’m in the process of re-writing my autobiography.  I initially wrote it back in the early nineties.  Until now it never seemed like the right time to publish it, but now I believe the time has arri...

Dr. Robert Owens - avatar Dr. Robert Owens

Five aspects of Pentecostalism that shed light on Scott Morrison's politics

Prime Minister Scott Morrison sings during a service at the Horizon Church in Sydney in April.Mick Tsikas/AAPPrime Minister Scott Morrison began his victory speech on Saturday with the words, “I...

Philip Almond, Emeritus Professor in the History of Religious Thought, The University of Queensland - avatar Philip Almond, Emeritus Professor in the History of Religious Thought, The University of Queensland

Why the 2019 election was more like 2004 than 1993 – and Labor has some reason to hope

I recently had cause to look at a large file of material I collected about Mark Latham during 2004. It is full of many of the same columnists who have just campaigned successfully for the return of th...

Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University - avatar Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University

Eastern China pinpointed as source of rogue ozone-depleting emissions

Sunset at Australia's Cape Grim observatory, one of the key global background monitoring sites for CFC-11. Paul Krummel/CSIRO, Author providedA mysterious rebound in the emissions of ozone-depleting c...

Paul Krummel, Research Group Leader, CSIRO - avatar Paul Krummel, Research Group Leader, CSIRO

Where to now for unions and 'change the rules'?

Very few people saw the Coalition’s win coming. If it was, as opposition leader Bill Shorten contended, “a referendum on wages” then it follows that Australians were content with slu...

Anthony Forsyth, Professor of Workplace Law, RMIT University - avatar Anthony Forsyth, Professor of Workplace Law, RMIT University

How we solved the mystery of Libyan desert glass

Shutterstock LinnasIn the remote desert of western Egypt, near the Libyan border, lie clues to an ancient cosmic cataclysm. Libyan desert glass is the name given to fragments of canary-yellow glass fo...

Aaron J. Cavosie, Senior research fellow, Curtin University - avatar Aaron J. Cavosie, Senior research fellow, Curtin University

Aboriginal Australians want care after brain injury. But it must consider their cultural needs

Australia's first Aboriginal Brain Injury Coordinator, Rebecca Clinch, with brain injury survivor Justin Kickett.Edith Cowan University, Author providedThis article is the fourth part in a series, Whe...

Beth Armstrong, Foundation Chair in Speech Pathology, Edith Cowan University - avatar Beth Armstrong, Foundation Chair in Speech Pathology, Edith Cowan University

Rethinking tourism so the locals actually benefit from hosting visitors

Tourism today has a problem and needs an entire rethink. Pundits are debating overtourism, peak tourism and tourismphobia. Cities such as Barcelona, Venice and Dubrovnik are witnessing a backlash agai...

Freya Higgins-Desbiolles, Senior Lecturer in Tourism Management, University of South Australia - avatar Freya Higgins-Desbiolles, Senior Lecturer in Tourism Management, University of South Australia

Wind in Albanese's sails as Chalmers weighs options

Shadow treasurer Chris Bowen has pulled out of Labor’s leadership race, increasing the pressure for an uncontested run for Anthony Albanese, which would prevent an extended limbo period for the ...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

With the LNP returned to power, is there anything left in Adani's way?

After months of “start” and “stop” Adani campaigning, the coalmine is poised to go ahead following the surprise success of the Coalition government at the federal election. So ...

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University - avatar Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

New data shows sex offenders in Victoria are going to prison for longer

There is a common perception in Victoria that courts are too lenient on offenders, but sentences for sex offences are actually increasing.ShutterstockSentences for most sex offences are getting harshe...

Paul McGorrery, PhD Candidate in Criminal Law, Deakin University - avatar Paul McGorrery, PhD Candidate in Criminal Law, Deakin University

Queensland to all those #Quexiteers: don't judge, try to understand us

Progressive voices have lit up social media with memes blaming Queensland for Labor's loss in the federal election. But characterising the state as regressive and redneck is misplaced. ...

Anne Tiernan, Professor of Politics. Dean (Engagement) Griffith Business School, Griffith University - avatar Anne Tiernan, Professor of Politics. Dean (Engagement) Griffith Business School, Griffith University

In a notoriously sexist art form, Australian women composers are making their voices heard

Performers in Speechless, a new opera by composer Cat Hope, co-commissioned by the Perth Festival and Tura New Music. The opera is a response to the Australian Human Rights Commission’s 2014 rep...

Karen Cummings, Lecturer in Singing, University of Wollongong - avatar Karen Cummings, Lecturer in Singing, University of Wollongong

Sex trafficking's tragic paradox: when victims become perpetrators

The victim-offender overlap is disturbingly common in the human trafficking trade, with women once trafficked becoming traffickers.www.shutterstock.comBorn in rural Thailand, Watcharaporn Nantahkhum ...

Alexandra Baxter, Researcher/PhD Candidate, criminology and human trafficking, Flinders University - avatar Alexandra Baxter, Researcher/PhD Candidate, criminology and human trafficking, Flinders University

Asked at the banking royal commission how long it might take to embed the right culture in the National Australia Bank, its chairman Ken Henry replied: ten years.

As head of the Commonwealth Treasury before he left to join the NAB board in 2011, Dr Henry was regarded as a good, if cautious, forecaster. So ten years might be about the right answer.

He said there were “cultural inhibitors” at the bank, and he is right.

Deeply embedded within the workings of many financial institutions is a corrupt ethos of client exploitation.

These words might seem harsh, a kneejerk reaction to outrageous and possibly transient circumstances.

But they are neither my words, nor new ones.

Commissions corrupt, inevitably

Way back in 1826, when life insurance was in its infancy, it was already apparent that many policies were being mis-sold.

Charles Babbage, better known as the inventor of the first programmable computer, but also actuary of the Protector Life Assurance Society of London, identified the fundamental problem with commission-based selling of financial products, which he likened to “the acceptance of a bribe”.

It is a system, said Babbage, that will inevitably “corrupt and debase those through whom it is carried on”.

Read more: Toppling bankers can be satisfying, but it's not enough to heal a sick culture

What Babbage described is what economists have subsequently called the “agency problem”, and it is endemic to commission-based remuneration where the agent is supposed to be working in the best interest of the client, but will gain greatest personal benefit by selling the product that offers the largest commission.

It is present whether the product is insurance, or financial advice, or a mortgage.

Bankers’ codes of ethics don’t work

The Royal Commission has shown that insurance companies, banks, brokers and advisers are prepared to trample on the trust placed in them by millions of Australians by putting their own income and interests ahead of their clients’.

Read more: A tip for bankers ahead of the royal commission: be more like doctors

The way professions have typically addressed the agency problem is by constructing a set of moral codes and formal regulations to prevent (or at least limit) bad behaviour.

Medics have their Hippocratic Oath; lawyers have their Code of Ethical Conduct, and in large measure they seem to work.

Insurers, bankers, brokers and financial planners have less formal codes of conduct, but it is now clear that they don’t work – they are little more than smokescreens to conceal self-interested avarice.

As Babbage noted almost two centuries ago, wherever financial products are sold on commission, the payment received by the agent or broker has all the characteristics of a bribe.

What will work is removing temptation

These habits of rapacity are so deeply ingrained in the culture and operation of financial institutions that no amount of self regulation, no elaboration or reinforcement of voluntary codes of conduct, has been able to spare the sector from the corruption and debasement that Babbage foresaw.

More self regulation won’t help.

Here’s what would.

First, ban commissions of all types

The government should impose an outright ban on the payment of any commission of any kind with respect to any consumer financial transaction.

The cost of the work should be transparently priced, and should be paid for at the point of delivery.

Read more: Restructuring alone won't clean up the banks' act

It would, at a stroke, end high-pressure selling and would reward financial advisers and brokers for the service they actually deliver to clients.

Those who deliver good advice would prosper. The rest would go out of business.

The idea lies at the heart of the banning of commissions in Labor’s Future of Financial Advice Act, which unfortunately did not extend its ban on commissions to those for insurance.

Then report fees as dollar amounts

Second, where clients buy a financial product that charges an annual management fee, such as a superannuation account, the fee should be reported to the client in dollar terms rather than the percentage of funds under management.

Each year the client should be given the option of a “free transfer” of their funds to an alternative provider that can offer the same product for a lower fee.

Read more: With a billion reasons not to trust super trustees, we need regulators to act in the public interest

It would open up the opaque structure of management fees to critical review by clients, and would impose competitive pressure to drive down fees, which in Australia’s bloated superannuation sector are more than double the OECD average.

Such reforms would be greeted with howls of protest from super funds (and banks, where banks still control them) but as Babbage foresaw and the Royal Commission has demonstrated, the industry has become so beholden to its own self-interest that it has forfeited the right to control its future.

Authors: The Conversation

Read more http://theconversation.com/well-wait-an-eternity-for-the-banks-to-fix-themselves-heres-what-we-can-do-now-103098