What happened to the customer

Following the fallout from the US subprime drama, or as Kev07 calls it the GFC has been interesting to say the least.

The media articles are the tip of the iceberg with a number of books now available that also try to document what happened in the lead up to 2008 in the US banking sector.

The one question I keep finding myself ask is what happened to the customer?

One of the first things you learn as a professional accountant is that you have a responsibility to act in the best interests of your clients, a responsibility that appears to be lacking in other financial sectors both in Australia and overseas.

Reading 'A colossal failure of common sense' there are several mentions of where traders were making deals to protect Lehman's butt while placing their clients in the precarious position they were trying to avoid for themselves.

You have to wonder where the responsibility to their clients were or if they were only worried about their own pay packets. David Dixon raises that same point but alas it is less of a problem when the two clients are other insitutional investors, but does that make it any better?

For the record, Australia has a clause in the Corporations Regulation that exempts parties from holding a financial services licence if they are selling to sophisticated investors which is anyone investing over $500,000. Sounds a lot but what if that were an inheritance or lotto win. Sure these are in the minority but should the level of cash involved mean less responsibility to the client?

The US bank executives are not doing themselves any favours by spending large chunks of cash while the US economy is still in a state of peril.

Since the financial advisor/planning industry was spun out from the banking sector this lack of responsibility to clients has grown and given us the modern day problems like Storm Financial.

For a quick summary of what is happening in the US market and which banks are now under investigation for a variety of issues including misleading investors and breaching SEC, the US equivalent to ASIC rules and regulations, head over to this handy summary page.

Whistleblowers are even urging ASIC to get involved with the Australian arms of these big banks and seek retribution.

We are a long way from finished to see what unfolds but a tightening of regulations is definitely on the cards here in Australia starting with the financial planning industry.

I would also like to see an increase in the responsibility owed to the customer. Although this should be implied, it clearly hasn't been in the past which means to make the customer count, we have to legislate it. 

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