TPA review will favour bank planners
A review of the Trade Practices Act’s (TPA) merger provisions would only serve to further exacerbate the banking sectors growing ownership within the financial planning industry and further reduce consumer confidence in the industry.
The warning by the Australian Consumer Association’s (ACA) chief executive officer, Louise Sylvan, comes at a time when pressure from big business to review merger laws continues to grow.
“It didn’t look to me like it was a priority, but pressure from big business wants the government to relax merger laws,” Sylvan says.
At the centre of a TPA review, is the reassessment of the four pillar policy which currently prevents any merger activity between any the ‘big four’ banks — Westpac Corporation, National Australia Bank, the Commonwealth Bank of Australia and ANZ.
The ACA says of particular concern is arguments that supposedly justify an abolishment of the four-pillar policy. These include strengthening the banking sector from international takeovers and creating synergies that will lead to cost cuts for consumers across the board.
ACA financial services policy officer, Catherine Wolfhusen says such opportunities have either been diminished or there is little evidence that they would ever be achieved.
While both the Labor and Liberal party have suggested the review of the TPA, Sylvan says Prime Minister John Howard’s focus has been on a review of the Business Council and its ‘national champions’ policy.
“It is our view here at the ACA, that companies that have not learnt to compete at home won’t be able to compete overseas,” Sylvan says.
Such a strategy for foreign competition does not have huge implications on the financial planning industry that is primarily focused on a domestic market.
However, where a review of the TPA could impact the financial planning industry is in its close relationship with the banking sector.
Sylvan warns if merger laws are relaxed and the four-pillar policy is reviewed, consumers will increasingly question the neutrality of the advice they are given.
“Consumers will be less confident that they are being dealt with in their own right. On the supply side, there will be less product and price diversity,” Sylvan says.
This would come at a time when the industry is increasingly under scrutiny for the squeeze on both, according to Sylvan.
AUTHOR
Jason Spits
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