What my garbos can teach the banks…

I’ve always left a case of beer out for our garbos each Christmas.

However, this year they were not able to accept it.

It’s ‘not part of council’s new code of conduct’.


I value the job done by our garbos in the early hours every Tuesday morning.

Value was identified as missing in Australian financial services in 2018.

Regardless of legislative consequences, last year’s royal commission will be long remembered.

It will spark change – a change for all our financial lives.

And potentially, not all good.

Who holds the power?

The Royal Commission showed us all where the power has resided in our financial lives.

With the manufacturers of financial products and services.

Everyone of us with a superannuation fund, an insurance policy, a mortgage or a loan, a bank account, a lease arrangement or a credit card has been drip-feeding the power base of today’s product manufacturers via our regular, usually unknown fees, obscured in fine print, and worse, expressed in the form of misunderstood percentages.

The royal commission has rightly questioned the value of these fees we all make every day in some way whether we are unaware or aware of them.

Justice Hayne’s task was the search for instances of misconduct in our banking, superannuation and financial services industries. One of the many insights alongside the questionable value of the millions of fees we all pay for services whether valued or not made has been our apathy.

His 1081 page interim report released last September mentioned ‘greed’ fifty times.

It seems that some have taken advantage of our apathy.

While we brisk when any right to our own identity is threatened, we’re apathetic when suppliers of financial products charge us fees for purchases made years prior.

We don’t read the fine print.

We don’t read the privacy policy.

We don’t believe the problem might be us and the attitudes or habits of our own financial lives.

We don’t trust financial services.

That’s just the way it is.

When mixed with our own ignorance and literacy levels, it doesn’t get better.

Five out of four of us don’t understand percentages and 125% of us have problems with decimal points (!).

Our misunderstanding of basic maths is a contributor to our bigger misunderstanding of the fees we all pay every day in some way to those who better understand the beauty and power of fees for services in percentages, particularly those that involve decimals.

As 2019 starts, our ignorance, literacy and apathy are troubling.

As the post-royal commission years evolve, the exact opposite of what Justice Hayne hoped for might come true.

The power play by suppliers to slice ongoing fees from our financial purchases will intensify as they find new ways to maintain the lucrative product bias.

New dangers ahead?

What will 2019 produce?

Short-term we may wait for election results, stock markets to settle, or housing prices to soften, until we make more financial product purchases.

But longer term, we will purchase more loans, set up or switch to new bank or payment accounts, take out more insurance, build up our superannuation balances, search for ways to extend our retirement lifestyles or provide for our aged care needs.

And therefore, as we do today, the suppliers of financial products expect that we will continue to pay fees for purchase decisions made years prior.

Also expect plenty of spin and ‘control-of-the-agenda’ rhetoric from suppliers and aligned commentators.

Totally understandable.

The incumbents simply want to ensure their future can be as predictable as possible.

However, the core and neglected issue isn’t compliance to proposed changes, but value.

Specifically, the value delivered by financial products and the institutions that produce them, to us.

Thanks to the rise and dominance of the financial product providers over the last four decades, we value and purchase our financial products in similar ways we purchase our airfares and mincemeat.

That is, value has primarily been comparative.

Their marketing messages give it away.

Value has been implied because “our product is cheaper” or “our product has better investment returns” or “our product handles tax most effectively” or “our product has great honeymoon periods” or “our product is commission-free” or “our profits are for members”.

If we believe ‘success’ of our financial lives was dependent simply upon a collection of different financial products, we might also believe that having a well-stocked medicine cupboard will ensure our healthy life.

While we understand that medicine isn’t as valuable as what it helps us achieve, we don’t understand that with financial products.

The focus of the product manufacturers isn’t on the value of financial products as much as it is on the distribution of financial products.

On top of that, we’re heading full-stream into a new power shift in financial services headed by the likes of Facebook and Google whose strangle-hold on user identity means that 90% of all non-Chinese websites offer login via either of their credentials.

Our online identities, spending histories, travel records, friendship groups, and other aligned interests will be sought after by data-brokers all vying to on-sell our behaviours to highest bidders.

More governments will likely follow India’s example of Aadhaar’s 12-digit number for every citizen with proclaimed good intent, but generating new issues as they seek compliance to what they and other rent-seekers believe is better governance for us all.

Product has taken precedent over value in financial services for too long.

While proven in the design, production, delivery and support of great financial products, the manufacturers and distributors are not proven in the delivery of value.

Very simply, because they don’t make any money selling value.

Living Longer Financially

If predictions are true and current product trends continue, our financial product cupboards will be full of fee-dripping products for years.

Next year’s Royal Commission into Aged Care acts as a timely harbinger.

More practices will come under scrutiny highlighting similar issues when the best interests of those deserving our care, patience, and respect, have not been the focus of suppliers in another rent-seeking haven.

And, what will the next inquiry be?

The unions?

Leaderless political parties?

The tech giants?

Regardless of the topic, the inevitability of further inquiries into misconduct will be as predictable as our politics. A trend Anna Bligh – the Australian Banker Association CEO baptised straight into the limelight of the 2018 Royal Commission – highlighted early during last year’s inquiry.

Notions of value, returns, retirement, welfare, entitlements, infrastructure funds, superannuation, secure lifestyles, property values, taxation and other topics will be stretched beyond today’s thinking as we all live longer.

Living not just longer, but hopefully well.

These are the times for different approaches in our changing financial lives.

Approaches such as the separation of financial advice from financial products.

Or realising the error that attempts to make advice affordable is a race to the bottom of quality advice rather than a focus to make advice valuable for more of us.

Or eliminating all notions of ‘on-going fees’ expressed in percentages for financial products or advice and replaced with charges shown annually in clear dollar amounts while insisting all fees are as clear as the warnings on our cigarette packets.

Or perhaps most importantly, better education that the continued treatment of our financial lives as a collection of financial products will never be as valuable or effective as an approach that treats the whole financial life of each of us, without bias, conflict or fee-clipping charging models.

If we are seeking greater value in our financial lives, we can’t assume the fintech giants and upstarts mimicking former product distribution models of the last four decades will add the value we need.

Neither should we be confident or enthused by attempts to ‘link’ us via scheme’s like India’s Aadhaar without debate and focus on consistent value provided to us rather than value to our governments, suppliers or regulators.

As we live longer, our rights to our money needs to be as respected as our right to life and our right to our identities.

The old and exposed fee-clipping models within financial services needs an overhaul to align the power where it belongs.

To us, those seeking greater value from their financial lives.

It’s all about value for money.

Just like the value I get from my garbos.

What do you reckon?

About Jim Stackpool

For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.

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