Equality of scrutiny

THE Industry Super Network (ISN) was right on target when its submission to the Parliamentary Joint Committee on Corporations and Financial Services (PJC) asserted that the financial planning industry is dominated by large, vertically integrated financial institutions.

When the industry funds refer to “vertically integrated financial institutions” they are really referring to the major banks and insurance companies. And they are right. The evolution of the financial planning industry has, unsurprisingly, been rooted in the banking and insurance sectors.

But when it comes to pointing to the influence of “vertically integrated financial institutions” the Industry Super Network might equally have looked in the mirror. Call it the Industry Super Network, call it Industry Funds Services, call it Members Equity, call it Industry Funds Financial Planning, but when you put it all together what have you got? You’ve got a “vertically integrated financial institution”.

What is more, some might suggest that you could then append to that “vertically integrated financial institution” a couple of out-riders closely involved in asset consulting and superannuation fund administration.

So when the PJC sits down to examine the broad shape of the Australian financial services industry it should not allow the industry funds to fly under the radar. It should closely examine the networks and linkages that have given rise to a conglomerate the equal of many of the mainstream financial institutions.

And, just as importantly, the financial services regulators would do well to look deeper than just the neatly-built façades when it comes to examining issues pertaining to the suitability of advertising and the expenditure of members’ funds.

There is a real danger that amid all the submissions and evidence to be given to the PJC, the industry funds “vertically integrated financial institution” will fly under the radar with the result that its influence and impact on the underlying fabric of the industry will be allowed to increase by default.

Equity will only be served if the broad industry funds’ structure is held up to the same scrutiny as an AMP or a Colonial First State in circumstances where not nearly enough is generally understood about what has emerged as one of the most formidable entities in the industry.

Just because the industry funds conglomerate is built to a different model and publicly espouses different philosophies does not mean that it should escape objective scrutiny. The industry funds conglomerate is now big enough and ugly enough to be viewed for what it really is.

— Mike Taylor