Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has made huge waves on the other side of the Tasman, and questions are now being asked as to whether New Zealand needs an enquiry on a similar scale.
According to Sam Stubbs, managing director of low-cost KiwiSaver provider Simplicity, it is in the country’s best interests to welcome such an enquiry, and ignoring the impact it has made in Australia would be a major act of omission.
“There are several things we know,” Stubbs told NZ Adviser. “The first is that the institutions in New Zealand and Australia have the same owners; secondly, that the title products are broadly similar; and thirdly, the products are sold in a similar way, i.e. through commission-based selling. There’s enough that’s similar to say that if this has blown up in Australia as spectacularly as it has, then it would be imprudent to assume that things different here in New Zealand.”
“The other issue is that this involves hundreds of billions of dollars of New Zealander’s investments. This is an industry that generates well over $5bn a year worth of profit, and so it is prudent, given the fires that are raging over in Australia, for us to take it very seriously.”
A number of financial advisers, regulators and politicians have since claimed that a full-scale enquiry in New Zealand is unnecessary as the financial sector is vastly different, however Stubbs says that such opinions are reminiscent of those in Australia before the full extent of misconduct was revealed. He also claims that if the industry genuinely didn’t need an enquiry, it should be welcoming the chance to prove that the financial sector is acting in New Zealanders’ best interests.
“It almost reminds you of that Shakespearean line- the lady doth protest too much,” says Stubbs. “If the industry truly has nothing to hide, then it should be welcoming an enquiry and saying yes, we would love a government-funded body to look at us and give us a clean bill of health. It’s almost like a free audit. But they’re not doing that- they’re defending their patch quite vociferously.”
“The Prime Minister of Australia said all the way down that they didn’t need that Royal Commission,” he continues. “It was the opinion of the regulators and of all industry participants, and yet now everyone is apologising and realising that they were wrong. We’re dealing with many opinions, but the only fact we know is that the enquiry uncovered a lot of things that were previously unknown. I would not be surprised if there were a lot of people who believe in their heart of hearts that nothing is wrong in New Zealand, and who will end up as surprised as anyone in Australia.”
According to Stubbs, incremental regulatory adjustments are a step in the right direction, but will not be enough to expose the full scale of any potential misconduct. Only a government-backed enquiry would be empowered enough to collect the necessary information, and provide those who speak out with the appropriate protection and anonymity.
“All the things going on in Australia were not discovered by businesses’ usual processes,” says Stubbs. “They were discovered only within that environment. For a $5bn profit in the banking sector alone, it is worth spending what would be a relatively small amount of money on a commission of enquiry. And if we find out that everything is running well, that’s fantastic! That means we can move forward being confident in how we make our investments, take out our mortgages and deal with our banks and insurance companies.”