You live in the world’s most expensive place. Apart from a few city states like Singapore and Hong Kong, you couldn’t pick a worse spot when it comes to the cost of living.
My first question is why? I know I moved here from Europe so I could do things like drive my tinny to the beach to go surfing. But for people working, saving and investing for retirement… it just makes very little sense.
Simon and the ILA team are getting ready to serve up alternatives over at International Living Postcards. You could move to where the air is clearer and nothing is dearer.
Today I want to add some of my own motivation for you to pack up and skip town, at least for a few years. It’s more of a stick than a carrot though. I call it ‘the rip- off nation’.
More importantly, many Australians have turned professional when it comes to rip- offs.
What I mean by that is Australia’s economy runs on professionals getting away with rip-offs. I hate to think what our economy would be valued at without lawyers overcharging, accountants making things unnecessarily complicated, financial advisors giving high risk advice, and insurance companies selling you the same policy in multiple different places. There’s a reason why professional pen pusher companies dominate our stock market.
From real estate agents to stock brokers, people are buying things they don’t need at unjustifiable prices with dodgy sales techniques used to get your pen to paper. Let’s focus on the financial advisor industry to get a flavour of what goes on. But remember, I think this sort of scandalous behaviour is the norm right across Australia’s professional services industries.
No doubt you’ve heard about Commonwealth Bank’s enormous compensation fund for clients who fell victim to its financial services. So far CBA has doled out more than $52 million, it’s offering clients $5000 to pay for the costs of hiring more advisors to review just how bad their advice was, and much more compensation is in the pipeline.
But CBA is far from unique. NAB is in the paper this morning with something dubbed ‘robo-advice’. Recently ANZ was caught charging clients for advice they didn’t even receive. It’ll be paying about $30 million back in compensation. CBA’s whistleblower reckons it’s common in the industry to charge people for advice they don’t get.
I think charging people for financial advice they don’t receive is preferable. The poor clients who do actually get advice from these banks and decide to take it end up in a far worse state. The Australian Financial Review profiled the cases of some people who decided to challenge the disastrous performance of their investments. Their stories make the problems of living in a rip-off nation come alive.
Don Waller ended up paying Macquarie more than a million bucks in advisory fees, brokerage fees, interest on a margin loan and option premia for their financial advisors to halve his nest egg. Nice work if you can get it. Worse still, they invested huge sums in currency trades—something he expressly told them not to do.
Queenslanders Brian and Simone Dogherty were forced to sell hundreds of thousands of dollars in shares to cover a margin loan they should never have had. They paid $71,000 for the advice that caused them emotional and financial hardship.
The stories go on and on.
Worse still, the banks’ compensation schemes and internal investigations are looking fishy too. Law firm Maurice Blackburn is investigating NAB’s $10 to $15 million compensation program which was suspiciously forthcoming for former clients. Lawyers are arguing the bankers only offer compensation to customers who meet a very narrow criteria, hoping the regulators will swallow their compensation scheme whole and stop asking questions.
And if you think this is a new phenomenon, you’re wrong. It’s just that hard times like the GFC expose it. CBA will review financial advice going back a decade! And the banks are masters at slowing down the exposure of their misdeads. Most of the problems relate to the GFC and they’re only now coming to light fully!
As Adele Ferguson pointed out in the AFR: ‘For those who say it isn’t systemic, how do they explain NAB, CBA, Macquarie and now ANZ, all of which have been found wanting in servicing some of their customers honestly and fairly?’
In fact, the list of things confirmed so far is pretty wide reaching when you put them in a list:
‘The crisis in confidence springs from a series of exposes in the financial planning arms of some of the country’s biggest banks, including allegations of forgery and fraud, a cover-up by management, advisers cheating on exams and excessive churning of insurance products. ANZ expands that to charging fees for no service.’