CUSTOMERS DRIVE COMPETITION

I must say I am finding the banking competition inquiry a bit too cosy and friendly. Not a great deal of hard questioning from our Senators to the bankers or non-bankers or consumer reps.
As someone who has written about banking and interest rates from the CONSUMER perspective for some time now, the Treasurer's "reform" package and ideas being recommended during the public hearings are classic deck chair re-arranging.
Competition between banks and non-banks, banks and mutual deposit-takers such as credit unions will not improve until consumers demand a better deal.
Initiatives to improve financial literacy in this country over the past 10 years have not garnered great outcomes. Many Australians still do not understand their mortgages, realise how interest is calculated on either their savings or credit contracts. They don't even keep track of what they are earning and spending. Until that changes, the banks can continue to get away with peddling complex, incomprehensible contracts that bind the uneducated customer to their brand for longer than necessary.
It will be customers that make the financial services marketplace truly competitive and while we are all slaves to our offset accounts and credit cards, the level of awareness and effort needed to drive a truly good deal, simply won't exist.

THIS WEEK'S NEWS YOU CAN USE

What's been happening in consumer financial services in the past seven days? Here are some stories, events, items and issues you may not have noticed.

• Small super funds doing better than big: the Financial Standard reported that all super fund returns have recovered to an average of 6.6% for the year ending October 2010 but the big funds are still "failing to fire". How does your fund's return compare with the industry average? We're very removed from our super in Australia but it is worth keeping an eye on, at least quarterly and talking to your fund if you're not happy with the bottom line. It's also worth checking your employer is paying what they should and that you have adequate insurance.
• The Tax Office will take a look at 10,000 self-managed super funds: one area that seems to be bringing SMSF trustees undone is the offering of financial support to fund members and their relatives. Unless such arrangements can be proven to be loans they are deemed to be early access to your super, which is illegal unless provided under very strict circumstances. If you're an SMSF trustee make sure you have a regular look at the ATO website, it has excellent SMSF information.
• All eyes on Asia: according to a report from Cerulli Associates: global emerging market funds domiciled in Europe are set to double between now and 2014 as more institutional investors take advantage of the rapid economic expansion of the Asian region. Stay tuned for future Truepenny posts on how to build safe exposure to the Asian boom.
• Early victories for Climate Advocacy Fund: Australian Ethical's Climate Advocacy Fund has scored some early victories since its launch earlier this year. Two resource companies, Aquila and Paladin have agreed to greater disclosure around their carbon emissions as a result of lobbying from the new fund, along with the Climate Institute. Stay tuned for more information about the Climate Advocacy Fund and other responsible investment opportunities.
• Rates on hold? The Reserve Bank is expected to keep interest rates on hold at its December board meeting although more rate rises are expected early in 2011. This is the bank's last opportunity to adjust rates before its February board meeting. So at least mortgagees have two months of certainty.