Day 397: 'Overconfident leaders with unquestioning direct reports'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 397.
Today in summary: the Hayne royal commission is being blamed for poor retail sales and a decline in credit card use, but mortgage brokers see the silver lining; and financial advisers could be forced to undergo more study in the wake of FASEA’s new education policy.
-- Charis
Current banker panic level: 😨😨
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Weak retail sales in December are an “unintended consequence” of the Hayne royal commission, according to James Stewart, lead retail partner at insolvency firm Ferrier Hodgson. Stewart told the AFR slow foot traffic data meant:
“In my 20 years in retail I can't think when people had a Christmas like that.”
Stewart is blaming conservative spending on the house price decline some have linked to tightened credit conditions stemming from the royal commission. Or it could just be people are tired of endless store “sales” and have permanently shifted their shopping online.
Meanwhile, the number of active credit users fell 0.4% between May and November to just under 16 million, according to RBA data, although credit card debt isn’t declining. Analysts suspect it’s due to banks encouraging customers to retire credit cards they don’t really need in order to get their home loan approved.
And mortgage brokers say business has never been better thanks to tightened lending conditions. Analysis from the Mortgage & Finance Association of Australia shows six in ten borrowers are still using brokers. The party is likely to be short-lived though, as banks renegotiate broker conditions and the industry braces for Commissioner Hayne’s final recommendations on trailing commissions.
Financial planners with existing university qualifications are reportedly fuming at the Financial Adviser Standards and Ethics Authority’s (FASEA’s) final “Education Pathways” policy. The standards body sets the education requirements for accredited financial planners, and it isn’t recognising all degrees.
Today’s burn prize: Fund manager Australian Ethical’s Stuart Palmer
🔥🔥🔥
“Let’s not just wait until the royal commission report.”
Palmer explains the group’s decision to divest from troubled wealth management firm IOOF in the wake of legal action taken by APRA.
The Commentariat
UNSW Business School actuary Anthony Asher writes in the Sydney Morning Herald that despite the bollocking they’ve received from the royal commission, media and public over the past year, many CEOs of large banks – drunk on power – still see nothing wrong with their “questionable practices”.
“When you consider what they are paid and how their subordinates treat them, one factor becomes clear. Academic research shows overconfident leaders with unquestioning direct reports make reckless decisions.”
For the reading list
Expecting a huge payout, investment banker loses his new job instead (New York Times)
“At a time when executive compensation is under growing scrutiny all over the world, Santander’s decision represents perhaps the highest-profile instance of a corporation rescinding a job offer because it was worried about the blowback from a rich payday.”
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