We Need a Market Free of Idiotic Government Interference

This week your editor will be relaxing in Hobart until Thursday. So, with the exception of today and Friday your daily dose of Money Morning will be delivered by our colleagues upstairs at the Daily Reckoning.

Next week we’re off to the Agora Financial Investment Symposium in Vancouver. So during that week your editor will report back on some of the presentations we’ve seen and people we’ve spoken to.

Over the weekend we got to see the schedule of speakers. Not surprisingly, Dr. Marc Faber of The Gloom Boom & Doom Report will be one of the highlights. But there are plenty of others.

Chris Mayer, Byron King and Doug Casey are at least three of the speakers we’ll make sure we see.

And as for your editor, well we can only assume the organizers are saving the best until near the end! We’re due on the main stage on the Friday afternoon for the 34th presentation spot out of 37 that will be held over the four days.

We just hope they do a good job of warming up the audience for us!

So, stay tuned to Money Morning this week to read what the guys at the Daily Reckoning have to say, and then look out for our words from Vancouver next week.

In the meantime…

“Free at Last!” Not Quite Dr. King…

There’s some good news to report. The handcuffs of regulation have been loosened. The ‘evils’ of the free market are not as evil as policymakers thought.

Therefore, inherently, it has been admitted that tough regulation is actually bad for the consumer and only good for those vested interests who aim to keep competition to a minimum.

As Dr. Martin Luther King Jnr said in slightly different circumstances:

“Free at last! Free at last! Thank God Almighty, we are free at last!”

OK, we exaggerate. Because in typical bureaucratic fashion some will benefit at the expense of others. Not that we’ve got a problem with winners and losers, it’s just we do have a problem with hapless pen-pushers in Canberra making the decision.

Friday’s Australian Financial Review (AFR) laid out the details with the headline:

“Super funds to compete on advice”

It means that superannuation funds will be able to offer general advice to customers, “including on the allocation of assets, retirement projections and insurance options.”

This is all stuff that any other person will need a qualification (including your editor) called RG146. It supposedly proves your competency to provide financial advice. The type of qualification the folks at Storm Financial also held!

According to the AFR article, “The government argued the change should deliver cheaper advice to members compared to the cost of using a financial planner.”

Again, we’ve no problem with that. In fact, why not get rid of the regulations altogether then everyone can provide cheaper financial advice and the public might actually get a better service.

I mean seriously, the Superannuation minister Chris Bowen is admitting that government regulation increases costs:

“This represents a significant benefit for superannuation members who have not been able to get answers to basic questions about their retirement savings without having to pay for unnecessarily expensive advice, while retaining adequate consumer protections.”

Because, let’s remember the reason why the costs of financial planners and financial advisers are so high to begin with…

It is because of the government regulations.

What we really need is a market free of idiotic government interference. That, at a stroke would reduce the costs of providing financial advice.

But it’s typical of bureaucracy and policymakers to try and take the credit for lowering costs when it is their own onerous regulations that have caused the high costs to begin with. Now they’ll make themselves out to be heroes, when in fact all these new rules will do is make competition in the financial planning industry even worse.

Not surprisingly, so far the mainstream press has let the government off the hook. They’ll parrot the government claim about this being great for ‘mums and dads that are’ – permenantly, it seems – ’sat around the kitchen table.’

Already – as we recall, and we’re happy to be corrected here – 90% of financial planning groups are controlled by either the four major banks or by a large ‘dealer group.’

The inevitable consequence is the larger planning groups will be able to use their economies of scale to put further pressure on the smaller independent financial planners.

Now, don’t get me wrong, I’m not saying that the smaller groups are always good and the larger ones always bad, but if it was hard for someone to set up as a small advisory firm before due to the regulations, it will be even harder when they are burdened with regulation for advice when the larger funds management firms can offer the same advice for ‘free.’

And naturally, the fund managers are hardly going to recommend customers ditch their existing fund in favour of one provided by the competition are they?

Yet again, meddling in the market by Canberra paper-shufflers will ultimately lead to less competition, less choice and higher costs even though the immediate impact appears to be lower costs.

We won’t shed any tears for the financial planning industry but we will lament another kick in the teeth to the free market.

On that note, it’s time to head off and enjoy Hobart…

Back on Friday!

Other Stuff on the Markets

The S&P/ASX200 gained 0.82% on Friday. While Wall Street was slipped by 36 points on the Dow Jones Industrial Average.

Meanwhile, in Europe the FTSE100 lost 31 points, and the CAC40 dropped 42 points.

The price of gold in Australian dollars was trading at $1,170.82, while in US Dollars it was USD$912.63.

The Aussie dollar lost ground to trade at USD$0.7764 and JPY72.85.

Crude oil dropped. It finished trading at USD$59.89.

Biggest movers on the market yesterday were…

On the economic calendar today we have Lending Finance.