Why ASIC isn't checking banks" financial planners A little perspective over Christmas Was Joe Hockey blocking ADM's Graincorp bid something the new government got right but received no praise for? PT5M22S http://www.smh.com.au/action/externalEmbeddedPlayer?id=d-2ztut 620 349 December 23, 2013 - 11:37AM The Australian Institute of Superannuation Trustees might want the relationship of bank-controlled financial planners and their masters investigated, but ASIC isn't doing it. Try APRA instead. After Michael West broke the story of bank-linked financial planners channelling clients cash holdings into mediocre deposits with their bosses instead of seeking the best available returns, I expected there would soon be a big kick coming of ASIC in the direction of the big banks" backsides. A revved-up regulator would be keen to show it wasn't just the little guys it would go after, and that this time, unlike the AMP shadow shopping scandal, the Big End of Town wouldn't just be whipped with a feather. But that obviously didn't happen. So I asked and ASIC has replied: As wholesale money, superannuation cash receives lower interest rates than retail money. This treatment is a result of Basel capital requirements that APRA regulates. So the comparison of rates should be a like-for-like basis. To the extent that super trustees are not diversifying or acting in the best interest of members by holding cash with a related party bank, this is a matter that APRA regulates, not ASIC. However, just because the rate is not the highest in the market (comparison to wholesale rates) it does not necessarily mean the trustee is not acting in the best interest or members. Trustees might have a variety of reasons for holding cash with a particular bank in addition to the interest rate. One reason often cited is operational efficiency. Responsible Entities must disclose any related party arrangement they have and any rebates or fees they collect in the FSG and PDS. This also applies to super trustees. Are yes, the myth that disclosure solves everything. And I wonder if the average punter regards the cash element of his or her super fund as "wholesale money." I suspect not. One suspects the FOFA (Future of Financial Advice) reforms might well have picked up such a thing as the dominant forces in the industry enjoying a cheap source of funds. Well, they would have before the Assistant Treasurer watered them down on Friday - the day after Westie's scoop. So it's over to APRA to check for signs of a boot heading towards the banks. Nothing on the website and it's Christmas Eve's eve. Guess it's a space to watch, but APRA itself is conflicted here. The main game for this particular watchpuppy is the strength and stability of the big four banks - something helped by access to cheap local deposits channelled by related party financial planners.