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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Minister Cormann's watered down FoFA Laws leave Consumers Unprotected

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http://www.afr.com/p/blogs/christopher_joye/comment_cormann_fofa_changes_gift_xrftj36KtmoyEsHZjRtOrN

Comment: Cormann’s FOFA changes a gift to big banks

Christopher Joye

The Coalition’s ostensible back-flip on its “reforms” to the Future of Financial Advice (FoFA) Laws, which were originally introduced by Labor to thwart mis-selling crises, will still radically change the way financial service products are sold and businesses organised.  But because politicians speak with forked tongues, and the Coalition has now occupied three different positions on the subject since December last year, the evolution of the changes needs to be traced to understand their significance.  Under Labor’s FoFA law all forms of so-called “conflicted remuneration”, including sales bonuses and commissions paid by employers or third-party product suppliers to individuals (eg, a bank teller, stockbroker, or planner) selling products to clients, were banned unconditionally for all products except loans, deposits, and insurance. This ban applied to situations where clients received “general advice” or “personal advice”.

General advice refers to communications that are limited to describing only a product’s characteristics and performance. It is not allowed to involve any product recommendations or statements evaluating whether the product meets a client’s unique needs.  This is the domain of “personal advice”, where a financial planner will examine your assets, liabilities, income, age, and risk and return preferences, and, based on that information, prepare a detailed 30-60 page “statement of advice” that includes a range of specific product recommendations on solutions that “meet your needs”.

Specifically, the Coalition will now not allow anyone giving general advice to receive any form of upfront or ongoing conflicted sales bonus or payment from their employer if the payment was made “solely because a financial product [was]…sold to the client”. To be clear, this is absolutely allowed under the bill that was introduced into parliament in March.....................

The protection the Coalition has consistently fallen back on when asked about this is that these conflicted payments are okay because they are only permissible if they do not “conflict” the personal advice the client gets. In Minister Cormann’s words, “balance scorecard incentive payments which do not conflict advice are permitted”.................the issue for Australians is that the best interests duty has been materially watered down by eliminating the catch-all obligation. This means that planners giving personal advice can recommend second-best super funds, platforms, and investments, which are clearly not the top solutions in their class, but which nevertheless still meet the client’s goals, and then receive a bonus from their bank for doing so.................read more    http://www.afr.com/p/blogs/christopher_joye/comment_cormann_fofa_changes_gift_xrftj36KtmoyEsHZjRtOrN

 

http://www.afr.com/f/free/blogs/christopher_joye/banks_mettle_untried_by_crisis_close_Necg8fenq9E7aLNXoyIs5J

Banks’ mettle untried by crisis close to home

When was the last domestic stress test for Australia’s banks? It was arguably not the global financial crisis, which was an externally imposed shock. You have to go back 22 years to find a local recession.

In 1992, Westpac took a bad debt hit of $2.7 billion. UBS says that single loss accounted for 44 per cent of its total “tier one” equity capital buffer that protects depositors from having exposure to a bank with assets worth less than its liabilities.

The change in net tangible assets offers another window on what happened during that downturn, UBS says. Between 1991 and 1992 Westpac’s net tangible assets per share plunged a staggering 45 per cent.

This also stacks up with the Reserve Bank of Australia’s analysis, which finds that almost 40 per cent of shareholder funds in 1989 were blown up by bank losses incurred in the ensuing three years.

It is widely accepted that Westpac and ANZ almost went bust. The worrying thing is these dramas were attributable to bad business and commercial property loans. Australia’s banks were not tested on their housing portfolios, which make up 60 per cent of lending today. Whereas the value of CBA’s business loans fell about 2 per cent during the recession, losses on home loans were less than one-tenth this. House prices actually rose between 1990 and 1992.......

read more    http://www.afr.com/f/free/blogs/christopher_joye/banks_mettle_untried_by_crisis_close_Necg8fenq9E7aLNXoyIs5J

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