The federal government’s Future of Financial Advice (FOFA) reforms were a great first step but needed to extend to banks’ cross-selling of credit products, the head of the Financial Sector Union (FSU) said yesterday.
“One of the fantastic things that this government is in the process of doing is introducing the Future of Financial Advice reforms, which actually make it a requirement in the industry [for those] who are giving advice to put the customer’s interest first, not to have the conflicted [remuneration] models that incentivise people to behave wrongly,” FSU national secretary Leon Carter said.
Carter said the union, which represents more than 50,000 members across the financial services industry, had approached the government to request the reforms, introduced in April by Financial Services and Superannuation Minister Bill Shorten, be extended.
“What we’ve said to the government is what Bill Shorten has done in the FOFA reforms is a fantastic first step to making this industry more responsible and better placed to genuinely look after the customer,” he said.
“What we say is if you embed those principles on the advice side, they’ve got to apply to the credit business as well.
“If it’s good enough to do advice with the best interest of the customer in mind and not suffer the indignity of the conflicted remuneration model, then the same thing should apply to the people who lend money.”
He said FSU members who had customer contact were required to meet targets for getting customers to take additional products or face lower pay increases and eventually the sack.
“At the moment, it’s very rare for our people in the big four banks to get an across-the-board pay rise,” he said.
He said a certain component of a pay rise was fixed, but the remainder was linked to meeting targets for the cross-selling of credit cards, personal loans, insurance and other bank products.
“What we say is the conflict arises because I’d have to sell a certain amount to hit a certain target and get a pay rise, but the conflict is the customer might not actually need that product,” he said.
“That’s why, on the advice side, the FOFA reforms will fix it. But we think the biggest thing that has to be fixed is on the credit and debt side of the business. The same principles should apply.”
During the banking industry’s recent earnings announcements, increased productivity figured heavily in presentations given by three of the big four banks.
“When they talk about productivity, what they mean is selling more,” Carter said.
“Even if you’re a customer who just wants to make a deposit, you’re not allowed to leave the conversation until the poor bugger behind the counter goes through a sales pitch on whether you want extra credit on your credit card, do you want another credit card, have you thought about an equity loan.
“We say that is completely irresponsible. We should be trying to meet the needs of the customer, not trying to sell them stuff like we’re a hot bread shop.”
