Banking revelations surprise even the most cynical, but on reflection, no surprises.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry hit the headlines this week with mis-deeds and malpractice in the banking sector front and centre. Even those who expected that Australia's banks would probably not emerge from Court Room 4A in Melbourne's William Street smelling like roses, might not have suspected the levels of graft, seriously poor practices, corporate governance and criminality that were revealed.
In particular lending for Australia's residential property market, which makes up such a large proportion of each bank's loan book, came under scrutiny, with executives from NAB and Commonwealth, and their respective distribution and mortgage broking arms, uncomfortably sharing the limelight.
It seems inevitable that if you hire a sales team, place them on significant commissions and incentives, (including both upfront and the trailing variety) and then set aggressive sales targets, selling into a market desperate to buy your product, you are going to end up with only one result - or more correctly one result, many thousands of times over.
To what extent part of this was either part cause, or effect, or a bit of both of the residential property boom is unknown. Maybe it's just a part of it, but given the record of the culture in the US mortgage broking and loan origination leading up to the GFC, surely Aussie banks' senior management must have seen it coming?
We suspect they did, but hey! Preventing, or stopping it would have been what is known in some parts of the industry as "commercially naive". Hence the old "sweep it under the carpet if possible" strategy.
That doesn't directly correlate with the fund management sector, but we'd be surprised if at some stage the Commission doesn't turn its attention to the banks' vertical integration in funds management and distribution, with banks wearing three hats (albeit frequently under different brands) as product issuers, (i.e. fund managers) gateways, (platforms) and distribution (financial planning groups).
While there are issues and potential for conflict abounding in the managed fund sector, they're likely to pale into insignificance compared with this week's revelations.
On a totally different note Stephen Hawking, one of the greatest minds of the last 100 years possibly longer, passed away this week, amazingly on March 14th, Albert Einstein's birthday, which also happens to be Pi Day (Pi = 3.14 ) and just one day before the Ides of March.
What was so impressive about Hawking was not only his ability under such difficulty, and his sheer determination to not let that inhibit him, but above all his sense of humour, as summed up by one of his better-known quotations, "Life would be tragic if it weren't funny".
