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Superannuation: Choice and Personal Responsibility

Air Commodore Robert M. C. Brown
7th March, 2016

So you think used car salesmen have an image problem. Read this damning assessment of an old and esteemed profession:

“The temptation to treat the problems……as simple defects must be resisted strongly. These problems arise from a deeply ingrained culture…….it is a culture which is cynical, self-serving, inward looking and largely indifferent to the public interest”.

This opinion from a UK investors’ group was contained in a submission to a 2004 review of the actuarial profession. It was expressed in the context of the role played by financial services industry leaders in the miss-selling scandal that accompanied the introduction of superannuation choice in the 1990s during which thousands of people lost their retirement savings (superannuation choice is being offered to members of the ADF from 1 July 2016).

Twelve years on, these words could easily be applied to sections of the Australian financial advice industry. Thankfully, recent inquiries in Australia into widespread poor behaviour have forced industry leaders to focus on alleged damaging cultural flaws and on remedies to resolve them. The question to be answered now is whether the industry’s leaders have any serious intention of permanently eliminating the conflicted product sales culture that has been the principal cause of the problems which have dominated the industry since the advent of financial deregulation in the 1980s; or will they do whatever it takes to cause the immediate criticisms to subside until the next uncomfortable public crisis of confidence, by which time many of them won’t be in the firing line?

Of course, unethical product sales people must take responsibility for their own actions, but they are not the principal villains in the financial advice industry. The villains are the leaders whose professional training has taught them that the industry’s conflicted structure is ethically wrong, who rationalise why it should be allowed to continue, who blame others for their own shortcomings, who fail to act until forced to do so by embarrassing inquiries and who intend to carry on with substantially the same culture after the damage has been done and the publicity has receded.

Worse still is the fact that many of the industry’s leaders privately understand the nature of the problem; however, most of them prefer to publicly support the superficially reasonable, but flawed approach that seeks to “balance” the interests of consumers and the commercial interests of the industry. This compromised approach to ethics has never worked and it never will. Indeed, it is the industry’s insistence on compromising its ethical standards in the name of being “practical” that caused the industry’s poor image and behaviour in the first place.

Therefore, when you are considering your choices under the new military superannuation arrangements from 1 July 2016, be mindful that what comes with the privilege of choice is the possibility that you could be convinced to make a decision that is not in your best interests. That’s why you should do yourself a favour. Take the personal responsibility to read and understand the wide range of superannuation and other educational material on the website of the ADF Financial Services Consumer Centre. And seriously consider seeking independent financial advice through the ADF Financial Advice Referral Program which may also be accessed at the Centre’s website (www.adfconsumer.gov.au).

Air Commodore Robert M. C. Brown AM BEc FCA
Chairman, ADF Financial Services Consumer Centre

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