Financial services provider IOOF Holdings Limited (ASX: IFL) is the latest firm to land in hot water over dodgy financial practices and has sparked calls for a royal commission into the industry.
Following revelations of serious misconduct by Fairfax Media, IOOF has been forced to appoint an independent adviser to conduct a full review of the IOOF group regulatory breach reporting policy and procedures and the control environment within its Research division.
The company says it intends to inform the regulators Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) of the outcomes.
Some of the revelations uncovered include fraud, forgery, management cover-ups, low-ball offers of compensation to clients, poor advice, front-running by staff, insider trading and a number of other extremely serious issues. It clearly seems to show a company entirely too focused on its bottom line, with little care for its customers and clients, and seemingly no regard for the rule of law.
IOOF is no small fry in Australia's financial services industry. With a market cap of $2.7 billion, $154 billion in funds under management, administration, advice and supervision, and more than 1,000 financial planners working for the company, it holds serious sway over around 650,000 Australians' livelihood and retirement.
The company is not the first of course, with Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Macquarie Group Ltd (ASX: MQG) have all previously been accused of providing dodgy financial advice and other unsavoury, unethical actions in dealing with clients.
No wonder a recent Senate Inquiry called for a royal commission into CBA and a wider investigation into the rest of the industry last year. Today, Greens Senator Peter Whish-Wilson is also pushing for a royal commission into the finance sector, but it's reportedly unlikely to succeed with both Labor and the Abbott government refusing to support it.
While we may or may not need a royal commission, one has to wonder how many more skeletons there are still hiding in the financial sector's cupboards.
But it does highlight one particular aspect for Australian investors. If you don't take control of your finances, you may end up far worse off. There are a number of steps we can all take to help ourselves.
- Educate yourself, so you know where your funds are being invested.
- Take the time to understand what fees and expenses you are being charged, and if they are too high, look for better options.
- Take more of an interest in your financial situation, rather than leaving it in the hands of the so-called experts.
- Take more control and invest through a self-managed super fund (SMSF) rather than through managed funds and various investing 'platforms'. As I wrote in this series of articles, it's easy enough to replicate a balanced managed fund (or almost any type of fund) simply through low-cost securities sold on the ASX.
- Read as many investing books as you can get your hands on, and then read some more.
Australian investors could also do with a helping hand from the government to stop these dodgy practices occurring. So far, it seems like most of our politicians have their heads in the sand.
