A fairer system

first_img Facebook Twitter: @NeosKosmos Instagram You may have caught wind that there will be an inquiry into the financial system early in the new year. Whilst this news is probably snooze inducing for most people, there are plenty of reasons why you should pay attention. The financial system takes our deposits and lends us money for a home or a small business. It can help determine whether we get wealthier or poorer – and it can affect whether we can afford to fulfil lifelong dreams of buying property or retiring with some comfort. The inquiry will address some key problems with the system and Australians have a once-in-a-decade opportunity to get involved. Here are some of my thoughts so far to make the system fairer and better for the hardworking people that it is meant to serve. First, we need to see transparency in interest rate advertising required in legislation to protect Australians from ‘too good to be true’ deals. People need to have the ability to make informed decisions and compare apples with apples. After all, a mortgage is probably the biggest debt you’ll ever take on. You want to make sure you’re getting the fairest deal on it. Second, the two Australian dreams – a home and a comfortable retirement – are becoming unachievable for so many people. We’re taking on larger mortgages, later in life, and for longer. But given we know that one of the best indications of security in retirement is owning your own home, the system needs to take better account of that as well as the current focus on retirement income streams. It’s not one or the other – it’s both. Thirdly, every Australian should have the ability to master his or her own finances. If you’re one of the few that can, either you were lucky enough to have parents that taught you these skills, or you have sought out professional financial advice. We need reform of our systems to make financial education a priority for all people, and from a young age. My fourth point is that there needs to be more competition in the lending market. Smaller players can provide tailored, competitive and secure services and keep the system competitive and consumer-focused. In the past, government and the regulators have favoured the bigger ‘too big to fail’ players at the expense of their competitors. Yet size does not equal safety in financial systems – the GFC proved that – and as any economist will tell you, when there isn’t enough competition, Australians end up paying more. Finally, our system is not geared for women, young people, small business owners, or for people that have irregular, interrupted income due to family, consultancy work or other situations that fall outside the 9-5 norm. Accumulating an income to retire on seems like a fantasy in these cases and that’s why reform of superannuation contribution rules is necessary. They are five simple points that I think will give us a fairer, stronger and more competitive financial system. If you have some ideas, I’d love to hear from you. *Mark Bouris is the executive chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark [email protected] with any queries you may have or check www.ybr.com.au for your nearest branch.last_img read more

Continue reading