First Samuel managing director Anthony Starkins dropped a bombshell on the re-cent Asia Pacific Private Banking conference in Sydney, labelling private bankers both “greedy and unethical”.
First Samuel managing director Anthony Starkins dropped a bombshell on the re-cent Asia Pacific Private Banking conference in Sydney, labelling private bankers both “greedy and unethical”.
“We must stop hiding behind the plethora of laws, regulations, standards, codes and rules that govern us. We must stop hiding behind our industry’s fragmentation and its jurisdictional differences,” Starkins told the conference.
“Our clients perceive corporate and individual greed, and in many cases have some justification for this perception.”
Starkins also stepped on toes by claiming the private banking sector lacks ethical leadership and condones breaches of the fiduciary duty they owe clients.
“Fiduciary standards seem to have passed this industry by. Instead we have had the mishmash of regulations and so on developed over the years and, in some cases, these have evolved to protect the practices of vested groups, not to advance the standards in the industry,” he said.
Starkins ended his verbal bombardment by urging bankers to refuse to pay or re-ceive hard and soft dollar commissions.
Starkins said commissions were the “first of the deadly sins” as they were not in the sole interest of the client.
He said it was unfortunate that many parts of the industry are still seeking to pro-tect commission practise, as if it were “heritage buildings or something of value, not to be touched”.
“Nowadays participants are required to disclose in some form the commissions they receive. Some of these disclosures are somewhat vague,” Starkins said.
“But I submit that disclosure does not change the unethical nature of this practice. Commissions are defended on the basis that they represent fair remuneration for the introduction of business. I believe an objective point of view would be that this is a cosy arrangement for the benefit of the people in the industry and to the detri-ment of the client.”
Starkins said bankers also needed to use at least three year histories when engaging in performance advertising and remain truthful when reporting results and errors.
He believes that if ethical issues are not dealt with immediately, bankers will loose the trust of their clients.
“If our clients do not or can not trust us, we don not have the basis for a sustainable business. Whether that trust increases or declines, is very much in your hands and mine,” he said.
The six deadly sins of private bankers
1. charging and receiving commissions
2. locking clients into investment structures that were unnecessarily costly to un-wind or vary.
3. charging clients twice or more for the one service
4. misleading advertising
5. reporting misleading performance results, and
6. the failure to report and correct
