Ground zero of the mortgage crisis

Let me take you to ground zero of the mortgage crisis.

Right now the National Debt Helpline (1800 007 007) is receiving so many calls that they’re at breaking point.

The helpline refers people in the most dire situations on to community-based financial counsellors ‒ yet the demand is so intense that the wait time for someone to actually sit down in person and help has stretched out to three months!

(And it’s only getting worse. As I reported last week, a study has suggested that one million people may find themselves in mortgage stress if ‒ when! ‒ interest rates move upwards by just 0.1%.)

Hang on, who are the financial counsellors and what do they do?

These guys are the unsung heroes of the financial services industry. They’re free to use. They’re independent. And in your darkest hour they’ll stand shoulder to shoulder with you and fight for you when no one else will:

For the guy who’s just been diagnosed with a terminal illness …

The mother who grabbed her kids and fled from her violent husband in the middle of the night …

The young woman with a brain injury who doesn’t understand the (deliberately confusing) payday loan contracts …

The father who was laid off from work and is just trying to keep food on the table …

Yes, the ongoing Banking Royal Commission has shown us ‒ over and over again ‒ that we need these heroes.

Yet the truth is that the financial counsellors are having their own financial crisis: there are not nearly enough of them on the ground. I believe so passionately in what they do that I’ve donated 10% of my book royalties to the Financial Counselling Foundation … yet it’s a drop in the ocean.

There is only one man who can truly help: Dan Tehan.

Dan is the man, because, as the Federal Minister for Social Services, his portfolio funds the community-based financial counsellors. Dan has made recent announcements on financial counselling funding, but this only extends existing funds and doesn’t grow the services to meet demand. You need to fund ’em, Dan … it’s a growth industry!

So here’s my call to you, Dan Tehan. The financial counsellors need someone to stand shoulder to shoulder with them and fight for them when no one else will.

Now’s your chance, Minister. Make us proud.

Hey Kids, Let’s Learn about Credit Cards!

Dear Scott

I am a teacher and I just got an email which made me angry, and I have you to blame... or should I say thank? You see, our children are attending a compulsory ‘StartSmart’ lesson once a week hosted by the Commonwealth Bank. I looked at the program for Year 3, and what is the very first concept they mention? You guessed it, credit cards! I will be attending the session with my students and I can already feel the rage inside.

Narelle

Hi Narelle,

They’re talking to eight-year-olds about credit cards?

That’s kind of … shocking.And the concept of compulsory corporate-branded education reminds me of ‘Hamburglar University’.

However, you’re a teacher, which means you can be a force for good. You can stand up and fight for your kids. If I were in your shoes, I’d talk to your principal about kicking the CBA out of your school ... and use it as a financial lesson for the kids.Here’s how you can explain it to your students:

“The CBA has spent millions of dollars of their shareholders’ money buying their way into classrooms.

“Their motivation is to make that money back by signing you up to be their customer.

“One of the bank’s most profitable products is a credit card, and when you turn 18 they’ll likely send you one.

“The bank brings mascots to assemblies, like ‘Cred’, which make credit cards sound normal.

“However, the truth is that you should avoid them.

“This week ASIC released a report that showed that one in six people are caught in what they call a credit card ‘debt trap’. Worse, they found that young people’s credit card debts were ‘of particular concern’, and that they ‘were more likely to be in delinquency, and multiple cards were over-represented’.

“The CBA will never tell you that they’re ‘debt traps’, because it’s how they make their money.

“However, that’s not independent education; it’s really just another form of marketing. And that’s the reason we decided to kick the CBA out of our school.

“Now that would be a fantastic financial lesson!

Scott

When the Bank of Mum and Dad Goes Bad

Can you remember when you got your first credit card?

Mine was automatically bundled into my NAB student banking package when I went to university. At the time NAB said it was a smart idea for students to have access to a ‘low-rate credit card’ for ‘emergencies’ (like bar night).

That card allowed NAB to begin building a marketing profile on me. Through the positioning of minimum repayments on my statements and online banking, they trained me to see their credit limit as my money.

Then they began bumping up my credit limit.

That’s how the game works.

Commbank are doing this right now with their latest advertising campaign, which targets young people to sign up for their ‘low-interest’ Essentials credit card … instead of going through the hassle of borrowing money from their parents.

One CBA billboard says: “Because the Bank of Mum and Dad will probably give you a lecture, and you had enough of those at uni.”

Their TV ads show millennial kids having to suck up to their parents ‒ listening to their dad’s jokes, eating their mother’s terrible cooking ‒ just so they can borrow some money. CBA’s tagline at the end of the ad says: “For when you’ve outgrown the bank of Mum and Dad.”

A spokesperson for CBA said their ads aren’t manipulative in the slightest.

In fact, they’re in it to help young people:

“We believe it’s really important to help young adults develop good financial habits, such as budgeting and managing their money wisely. As they move into full-time employment, their spending and payment habits change, and this includes using credit cards.”

That’s the corporate spin, though there’s no way they actually believe it.

It’s all just part of the game.

(To be fair, the vast majority of CBA employees are hard-working, diligent professionals who care deeply about their customers. It’s just the top brass that are knobs.)

Tread Your Own Path!

Special Q&A with Kelly O’Dwyer.

This week I’m doing a special Q&A with the Minister for Revenue and Financial Services, and the Minister for Women, Kelly O’Dwyer.

Costello’s Regrets

Barefoot:

Your old boss, Peter Costello, says he regrets not doing more to lower fees on compulsory superannuation. Would you consider tendering out a default fund and making the big institutions bid ‒ lowest fees wins?

The Minister:

“I actually think Peter made some very good points.

“It’s very, very clear to me that for far too long people have been ripped off. Super funds need to understand that it’s not their money ‒ it’s their members’.

“Look, this cosy, opaque system that we’ve had for many years has come to an end. That’s why in the Budget we got rid of exit fees … because it was a barrier to switch. Our job as the government is to make sure that people’s money is protected and ensure they’re not going to be gouged with fees and charges.”

Women and Money

You have an interesting remit ‒ responsible for financial services and women. We know women retire on less than men, around $120,000 less. What can you do to change that?

“When it comes to super, we know that our Budget changes means that 2 million women will have their super balance protected from being charged inappropriate insurance.

“Another 1.3 million women’s super balances will be boosted by $2.5 billion by our plan to cap fees on small balances to 3%, and actively charging the ATO to reunite people with their lost and inactive super.

“These are very practical measures that are good for women. However, this is a passion of mine, and I’ll have a lot more to say about it in the Economic Security Statement in spring.”

Insurance and Young People

I applaud your decision to stop people under 25 being compulsorily charged insurance within super. However, the big insurers say it will increase premiums across the board by 30%. What do you say?

“I say that young people are being exploited and used as a cash cow for the entire pool of users.

“And I think that’s wrong.”

The Royal Commission

The Royal Commission has shown us that there are deep-seated cultural problems in the finance industry. How does the industry win back trust?

“There’s no question trust is at an all-time low.

“However, understand that the majority of people employed in the industry ‒ some 400,000 people ‒ are actually going about their day and doing a good job.

“The real responsibility falls on those that are in charge ‒ the boards ‒ and the CEOs need to ensure that they act with integrity. And if they don’t, we need our regulators to keep them accountable. That’s why as a government we’ve said if they are caught out doing the wrong thing, they can be put out of business, or put in jail.”

Thank you for reading,

Scott

Okay, I’m Angry

Commbank chief Matt Comyn is sorry …

He’s sorry his insurance guys ripped off terminally ill parents who took out life insurance with the bank.

He’s sorry his financial advisors ripped off retirees for millions of dollars with fraudulent advice.

He’s sorry the bank ripped off dead customers, by charging advice fees for no service.

He’s sorry the bank lost 20 million customer statements, and didn’t bother telling those affected.

And now he’s sorry that his bank teller staff scammed school kids’ Dollarmites accounts.

You’ve got to hand it to the CBA, their fraud has a kind of … circle of life to it, right?

This week we learned that thousands of children’s Dollarmites accounts were fraudulently manipulated by CBA staff, so they could earn bonuses and meet aggressive sales targets.

Hang on a minute:

Why would the bank link sales incentives to those cute-looking little Dollarmite accounts?

Because their Dollarmites program is easily the most successful marketing campaign in Australian history. In fact, one analyst has suggested Dollarmites was worth an astounding $10 billion to the bank.

How?

Simple. The CBA pays schools a token kickback for signing up students. Yet it’s chicken feed for acquiring a long-term customer. Especially when Choice magazine says that close to half of those Dollarmites end up staying with the CBA.

For well over a decade I’ve been calling out the Dollarmites program. Australia’s largest issuer of credit cards teaching kids about money is like Ronald McDonald teaching kids about nutrition.

Besides, the Dollarmite Youthsaver accounts terms and conditions are rubbish. Parents would be better off saving for their kids  in a high interest online savings account, and throwing their edu-marketing in the bin.

Look, I’ve dedicated my life to delivering independent financial education, and I can tell you that kids don’t learn much from the Dollarmites cute cartoon mascots like ‘Cred’, who rides a skateboard and is ‘a real cool dude’. Rather, it’s when Cred morphs into a credit card, and is mailed out to fresh-faced 18 year old cool dudes, that their real education begins.

There are well over five hundred thousand kids who are unwittingly enrolled into the CBA’s marketing database.

As parents, it’s time for us to tell the Commbank that their sleazy circle of life has to stop right now.

It’s time to ban Commbank from our classrooms.

Sorry, not sorry.

Tread Your Own Path!

Financial Planner Wants Advice

Hi Scott,

Am I in the wrong job? I am a financial planner. No, seriously please keep reading :) I got into the industry after being retrenched, as I was looking for something that would pay better than an admin job. I do my best to provide advice that is free from bias and not tied to products. Trouble is, sooner or later my boss is bound to notice and move me on. How do I help Aussies with their finances and still put food on my table?

Tim

Hi Tim,

The old saying ‘don’t hate the player, hate the game’ is true in financial services.

The Royal Commission is great, but unfortunately it tends to tar everyone with the same brush. The overwhelming majority of financial planners and mortgage brokers are good, hard-working, ethical people like you.

It’s the game that sucks. It’s been set up by the banks and AMP. It’s called ‘vertical integration’, and it’s basically where the banks manufacture products and then employ planners to sell them. If you’re working in a Holden dealership, you won’t be selling Fords.  Hopefully a recommendation from the Royal Commission will be to break up the vertical integration game. Yet what advice would I give you right now? Well, there are truly independent firms that charge hourly rates. Or there are financial counsellors, who do important work without flogging products.

Scott

Lock ‘Em Up!

Here’s something shocking that I learned about this week.

Apparently there’s been a spate of violent home invasions in which young thugs have been terrorising vulnerable pensioners, and it’s been going on for years.

In fact, one young thug was caught stealing $120 from a little old lady.

And when the cops caught up with him, and questioned him on it, he repeatedly lied and said it wasn’t him.

Yet, when he went up against the magistrate this week, he not only admitted his guilt but admitted he’d lied through his teeth to save his backside.

I’d say this young thug is heading for the slammer.

Okay … so I just made all that up. There was no gang. No young thugs ripping off $120 from pensioners.

But there is a gang … of wealthy, old banking executives on multi-million-dollar salaries who didn’t have to climb through a window — they were greeted at the front door.

And, according to the Banking Royal Commission this week, they didn’t steal $120 — they stole $120 million.

And that’s just Commbank, who the Commission called the ‘gold medallist’ in fee-for-no-service. Hell, they even slugged dead people fees for advice. For 10 years. Seriously, these guys are good!

All up, across the industry, some 306,000 people have been charged a combined $216 million for services they didn’t get.

And in the case of AMP, the Royal Commission found they’d even systematically lied about it to the corporate cops (ASIC).

(Though let me point out that while this has shone a light on what I’ve been saying about AMP for years, their investment bond — which I’ve previously said I’ve liked — is still a decent product.)

Yet let’s be clear — there will be no jail time.

Instead, the bosses will apologise — via their underlings, who they’ll send off to be shot on the Royal Commission’s frontlines — and they’ll quietly retire on their multi-million-dollar bonuses.

But here’s the rub: at its core, the banking and finance industry is based on trust. You need to trust that the company you’re dealing with won’t rip you off, and that they’ll have your best interests at heart.

What we’ve seen at the Royal Commission suggests we can’t trust them. And that’s backed up by ASIC, which recently found that in the case of bank employed advisors, in 75% of cases the adviser didn’t act in the client’s best interests.

Can you imagine our young thug appearing before the judge: “Look, Your Honour, I’ve made mistakes. I’ve robbed hundreds of thousands of defenceless pensioners for years. So it’s clear what I really need to do is … address my internal processes.”

Yeah, nah. I’m with ScoMo on this one. Lock ’em up.

Tread Your Own Path!

How to Invest in Shares With No Risk

Hi Scott,

My partner and I are quite young (both 28) and have bought our first home already. We are now looking to invest in the share market, and would like to take out a ‘protected equity loan’ to do so. Yes, the cost of it is high, but after that you own the asset. We are in it for capital growth over time, so we can accept breaking even for 10 years or so, particularly with the potential for tax minimisation. The trouble is, I know you do not think highly of this product. Could you please explain why?

Angie

Hi Angie,

On first glance these things look like the best thing since sliced (gluten-free) bread.

Here’s how Westpac describe their protected equity loan:

“The potential of Australian shares. The certainty of capital protection at maturity.”

Let’s say you take out a Westpac protected equity loan of $1,000 and invest in an Aussie share fund. If in five years’ time the shares are worth less than $1,000, all you need to do is hand them back to Westpac, and just walk away Renee (or Angie -- word up to those 90s kids who got that music reference).

Hot diggity dang! Who doesn’t want the potential of shares with the certainty that you won’t do your dough?

Sign me up!

Trouble is, there’s no free lunch in the stock market, and Westpac sure ain’t handing out gluten-free dinner rolls.

The devil with these loans is the interest rate you’re charged. Westpac builds in the cost of the capital protection (otherwise known as a ‘put option’), then adds a bit of gravy.

How much gravy?

Well, Westpac charges an interest rate of 8.95%.‘Trời ơi!’, as my Vietnamese friends say.

Bottom line?

These fancy loans are dreamt up by bankers and flogged by financial planners with one goal: to make them fat ongoing fees … not to help you.I’ve been Barefoot for years now, and I’ve come to understand a few things:

First, most people make dumb decisions just to save tax.

Second, most people don’t have the ticker to invest in the market with their own money, let alone with borrowed money.

Third, most people borrow at the wrong time. Like right now, when the market has been going up for over a decade and everything appears ‘safe’. The time to go ‘balls in’ (as my father would say) is straight after a crash, precisely when no one wants to invest in the share market.

So what should you do?Stick to the Barefoot Steps.You’ve bought your home at a young age -- well done!

That’s Step 4 done and dusted. Now it’s time to move on to Step 5 and increase your super contributions from the basic 9.5% (paid by your employer) to 15% by salary-sacrificing some of your pay packet (up to the $25,000 cap per person per year).This has two benefits:

You’ll get a genuine tax deduction (possibly slashing your top marginal tax rate by almost two-thirds) and, if you choose a super fund with ultra-low costs, your returns won’t be eaten away by some banking fairy.

Scott

The Acorns App

Hi Scott

I wanted to get your thoughts on the Acorns app and whether using this would be just as good as, if not better than, using a ‘Smile’ saver account for Mojo. I want to see my money grow quickly but am unsure whether using Acorns is relatively risk-free and worth it?

Tim

Hi Tim,

Hold your nuts Timbo, because I’m about to whack you in the acorns:

You say you want to ‘grow your money quickly’, but it needs to be ‘relatively risk free’?

Whack! Whack!

I’ve spoken about the Acorns app before. Basically, it’s the investment equivalent of putting training wheels on a bike (with a bell and pretty streamers on the handlebars). The app scoops up small amounts of money from your account and then invests it into Exchange Traded share Funds (ETFs) — and charges an extra layer of fees to boot.

It’s a bit of a gimmick, and I wouldn’t advise committing serious dough to it, and I certainly wouldn’t be keeping my short-term savings in the share market. In other words, the Acorns app is a Frown account, not a Smile account.

Scott

If you’ve got an ING card, read this

The other day, ING sent me a mass-marketing email with the subject line:

“Scott, refer a friend and you can both get $100.”

Now, given that my book recommends setting up a couple of ING accounts …

And given that my book has sold over 500,000 copies …

And given that ING has just announced they’ve achieved “a record 50% jump in customers this year” …

… why the hell am I even writing to you? Why aren’t I sipping a Bacardi in the Bahamas?

Oh that’s right — old dumbo here doesn’t accept any kickbacks.

To be serious for a second: I have no allegiance of any kind to ING. My only allegiance is to my readers, and I only recommended those ING accounts because they have zero account fees and zero ATM fees, and they pay a (relatively) high rate of interest.

Why am I telling you all this?

Because I feel a responsibility to keep these bastards honest.

And this week ING announced some changes to the accounts.

So I feel it’s appropriate to check them out:

First, they’re now offering zero ATM fees globally (speaking of the Bahamas). Coupled with the fact that ING already offers the wholesale exchange rate from Visa without a clip — which is why I’ve found I get a better rate than with cards from other banks.

Second, and more importantly, they’ve also eliminated international transaction fees on all overseas purchases — a saving of 2 per cent. Big news if you buy online (which somebody in my house seems to do quite regularly).

The fine print is that you need to deposit $1,000 a month into your account and make five transactions — in other words, make it your everyday account. And why wouldn’t you? It’s an all-in-one ripper: good for everyday banking, good for buying crap online, and good for holidays overseas.

Just be warned: do not take their upsell on their sleazy new credit card … after all, that’s what’s cross-subsidising all this fee-free generosity!

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are better bank accounts on offer. How do I know? Because my readers constantly email me about them! So before you do anything, google the best accounts on offer now.

How Should I Save for My Baby?

Dear Barefoot,

Firstly, I want to say thank you. I have been following the Barefoot system and this year my husband and I got pregnant with our first child! I am self-employed and had planned to work until a few weeks before he was due and then take advantage of government maternity leave. But he had different plans and arrived 10 weeks early; he’s still in the hospital ICU but thankfully doing well. More so, thanks to your book, we have two months of living expenses saved up and therefore can focus on our amazing little man rather than worrying about work. My question is: a friend has suggested that, rather than buy him gifts, we should drop some money into an account for him -- is Westpac’s ‘Bump Account’ worth looking into?

Emma

Hi Emma,

I don’t know what you’re thanking me for -- you did all the hard work.

(Then again, I have always said that Barefoot Date Nights are a wonderful aphrodisiac … and given we’ve sold 480,000 copies … that’s a lot of lovin’ going on.)

Now, to your question.

The Westpac ‘Bump Account’ really should be called the ‘Dump Account’, because it seriously has a stronger stench than your little one’s nappy.

Here’s how Westpac puts it:“On our 200th anniversary, every child born in 2017 is eligible for $200. If your parent opens a Westpac Bump Savings account in your name, we’ll deposit $200 into it which you can withdraw when you’re 16.”

Okay! Let’s rip off that soggy, boggy nappy off!

First off, you (the parent) have to wait 16 years to get the money.

Second, you’re dropping your kid into the bank’s sophisticated marketing funnel -- which will go into overdrive when they’re 16, rebellious, possibly Emo, and desperately lusting after a new iPhone 24.

Third, the interest rate they’re offering is trickier than a teething poo:

The base interest rate is a stinker 1.5%, and to get the advertised rate of 2.3% you’ll need to make a monthly deposit, ensure your account balance is higher at the end of the month than at the beginning, and keep your balance above $0 at all times.

Finally, and most importantly, if you’re saving long term for your kids, you’d be better off investing the money into shares via a low-cost index fund or a listed investment company (LIC).

In other words, dump the Bump -- your kid can do better!

Scott

Dump the Dollarmites?

Dear BFI,

My kid’s school is considering school banking, and someone suggested Dollarmites. I bit my tongue while screaming NOOOOOO inwardly. I want to attend the next meeting armed with my Barefoot ‘bible’ and strong arguments against Dollarmites, but I also need to supply an alternative. Someone else suggested school banking with Bendigo Bank, but what would you suggest? I want to educate our kids about finance, not set them up for financial ruin.

Melanie

Hi Melanie,

As Jenny from the Block would say, “You go, girl!”If I was at your P&C committee, here’s how I’d lay out the argument.

First, let’s look at this from the school’s perspective.

The CBA has said that it pays the average school $400 a year in kickbacks. That’s a great deal for the bank (after all, bank tellers get bonuses for signing up accounts). Yet it’s a crummy deal for even the most cash-strapped school.

Second, let’s look at it from a parent’s perspective, who are the ones putting the money in.

The CBA Youthsaver account pays a pretty attractive 2.29% per annum (*).

* Welcome to banking! If you fail to make at least one deposit a month, or if you make even one withdrawal, you’ll get a not-so-attractive 0.01 per cent. And if you forget about the Dollarmite account after a few years (which many of you will do), you’ll actually end up losing money when you account for inflation.

Finally, let’s look at it from a kid’s perspective.Financial education is a core life skill that every child will be tested on every day of their adult lives.

It’s far too important a subject to be left to a bank’s marketing department.In fact, financial education isn’t about opening a bank account … or even much about money. It’s about teaching values. It’s about raising resilient, hardworking, responsible and generous kids.

So, Melanie, what would I suggest?Hold off till next year.

Why?

Because I’m in the very, very early stages of writing my next book … which is all about teaching kids good old-fashioned money values and skills. And I’ll be taking it to schools -- no kickbacks, no bank accounts and no dancing mascots.

Scott

You Ripper!

Barefoot,

I just wanted to tell you about my latest Barefoot Date Night. Like you advised I rang the bank, followed your script, and they reduced my rate from 5.35% to 4.54%, all in a six minute phone call!  I was sceptical at first, but now I'm over the moon on the outcome of the phone call. Thanks again mate!

Daniel

Hi Daniel,

Well done man!

And to encourage everyone else to follow your lead, here’s my “$22,064 Phone Call Script” from my book:

You: Hello, my account number is ______. I’ve been with you for ___ years, but I’ve applied to refinance with UBank. Their rate is ____ per cent, which is a full ___ per cent cheaper than you’re charging me. Given our longstanding relationship, I’d like you to match the offer—or send me the forms I need to switch to UBank.

Bank rep: One moment, please.(You’re bluffing, of course. However, the bank’s sales team have strict targets, backed by incentives, that they have to meet—one of which is giving profitable customers discounts to stop them leaving.)

Bank rep: We can’t match the rate you have quoted. However, we understand you are a valuable customer, so we would like to offer you a 0.15 per cent discount.

You: That’s not good enough. I’ve already got conditional approval … so in order to stay I need at least a 0.5 per cent discount. Could you please speak to your supervisor? I’m happy to wait.

Bank rep (a full six minutes later): On reviewing your case, we can offer you that 0.5 per cent discount on your current rate.

You: Brilliant! Please send me an email confirming the new rate and confirming that it will be applied as of start of business tomorrow.

Scott

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are better bank accounts on offer. How do I know? Because my readers constantly email me about them! So before you do anything, google the best accounts on offer now.

If you were a drug dealer, how would you want to be paid?

If you were a drug dealer, how do you think you’d want to be paid?

PayPal?

No.

PayWave?

Well, no.

You’d want to be paid in cold, hard cash.

And if you were ‘Breaking Bad’ big, you’d only want to deal in $100 notes -- anything smaller would be too heavy to lug around in suitcases.

(This is for illustrative purposes only: I’m a married father of two -- the only drugs in my life are bottles of strawberry-flavoured Nurofen for teething tots.)

This explains the mystery behind why you rarely come into contact with $100 notes -- even though there are three times as many in circulation as there are $5 notes, according to the Reserve Bank.

Drug dealers (and tax cheats) are hoarding most of them.

So given these facts, it’s not surprising there are calls for governments around the world to kill off their large-denomination bills (especially the US$100 bill) -- as a way to make life harder for drug dealers, strippers, and terrorists.

Yet Australia is already ahead of the curve -- a report released last month by Capgemini found that we are one of the world’s top five cashless societies. So it’s really only a matter of time before large bills go the way of Clive Palmer. But it’s not just criminals that stand to lose with the shift to digital dollars; banks are going to be hurt too.

How My Phone Became a Money Machine

A couple of months ago I signed up with a bank that allows me to pay for things under $100 by tapping with my iPhone. Thankfully, my wife does the weekly supermarket shop -- god love her -- so almost everything I buy is under a hundred bucks.

Here is what I learned:

Like you, my phone is always within reach. That means I don’t have to lug around my wallet, whip out a bank-branded card, or even think about going to an ATM. My banking universe is pretty much just another app on my phone.

Portable Bank Accounts

And that brings me to the biggest news story of the week: the Government Banking Inquiry. Sure, the entire thing was a farce, yet the one interesting thing that came out of it was the concept of making bank accounts ‘portable’.

What does that mean?

Well, just like you can switch from Telstra to Optus without losing your phone number, you would be able to switch banks without losing your account number. (This means you don’t have to go through the hassle of changing over all your direct debits … and risk getting whacked with a dishonour fee if you forget one of them.)

Under the griller, ANZ boss Shayne Elliott said that he was ‘open’ to the idea.But really he’s not. He can’t be.

See, the banks are stitching us up. Everyone knows that we pay some of the highest bank fees in the world -- the politicians, the punters, and especially the bankers. Lucky for them, there are still enough people who see them as an institution (these are the people who once had to get dressed up to get a loan).

That’s all over. The bankers are now facing full on digital disruption. So the idea that they’d be ‘open’ to giving their customers the freedom to switch with a swipe is … suicidal.

After all, the real gangsters today are the bankers.

Not only do they get away with rigging interest rates and hitting people with shady fees -- they also get to spend their spoils (in the infamous case of ANZ) on cocaine and strippers.

The four families that make up the banking mafia pull in close to $30 billion in profits annually, and their respective Dons make over $10 million a year each … and none of it gets paid in $100 notes.Who’d be a drug dealer?

Hater Of The Week

Last week I wrote about Donald Trump. This caused a lot of people to lose their minds, including Bill, who was so infuriated that he got on the old tappety-tap and fired me off this email:

Scott,

I’ve always believed that you were a fool, and this week you proved it. The truth is that the only people who don’t like Donald Trump are ignorant people in the media LIKE YOU. Trump at least has the guts to talk about the massive financial bubble that global bankers have created. You have no business writing about politics. Please stick to what you (claim) to know from now on.

Bill

And here is my response ...

Hi Bill,Thank you for your comments.

You are in good company. I received a larger than usual amount of hate mail this week.However, like many American voters, you seem to be confused.

In my column last week, I actually started out by saying that I thought Trump’s comments on the credit bubble were intelligent (and that, by the way, is a ‘stop the press’ moment in itself).

Yet the real guts of my argument was about the the politics of fear -- and how the media picks up and promotes stories that scare us. The old saying ‘if it bleeds it leads’ is especially true when it comes to predictions about the stock market.

As I wrote last week:

Wall Street had the worst start to the year on record when the Royal Bank of Scotland made global headlines with their recommendation: “Sell everything.”

Plenty of people got freaked out and did just that. Yet since they made that call, oil is up 40 per cent, emerging markets are up 29 per cent, the US S&P 500 is up 14 per cent, and even the ASX 200 is up 10 per cent.

Anyway, I just want to thank you, Bill. I forwarded your concerns on to my editor. He loved it and suggested that I consider writing a political column. I told him that I know as much about politics as Trump knows about foreign policy. Then again, why let that stop me?

Tread Your Own Path!

Why Your Bank is Lying to You

Malcolm, I feel for you, brother.

On Wednesday, after the banks behaved like brats by not passing on all of the Reserve Bank’s rate cut, the Prime Minister held a press conference. He said -- essentially word for word -- the same things I say to my toddler each night at the dinner table:

“Your behaviour is just totally unacceptable. We treat you so well -- and this is how you repay us?! I think you need to explain your behaviour -- very clearly -- to your mother … because I am very disappointed in you. Now I demand that you eat all your vegetables!”

At which point my son pushes his bowl off the table and brussels sprouts go everywhere, and he grins at me as if to say, ‘and what are you going to do about it?’

Or in the case of the banks, they collude, collectively trouser $917 million … and grin even harder when Malcolm ‘demands’ they pass on the cut in full. They know he doesn’t have the mettle to put them over his knee and give them a politically incorrect spanking.

Yet the truth is, it’s not the banks’ fault for acting this way, any more than a tantrum-throwing toddler.

It’s our fault.

Just like parents, we set the rules and we decide what is acceptable behaviour:

We created these four precocious banking brats when we enshrined the ‘four pillars’ policy.

We underwrote their deposits.

And we have continually turned a blind eye to their naughty ways -- like when they rig interest rates, or when their financial planners rip off their customers’ life savings. Or, in the case of Commonwealth Bank, when they callously knock back insurance claims (like the case of the young dad with terminal cancer), simply because they can.

Former ANZ chief John McFarlane this week said he was ashamed at the reputation of our banks. "I joined the industry over 40 years ago where the bank manager was the doyen of the community".

McFarlane says that it’s no longer sufficient for banks to have an agenda "purely around shareholder value".

Easy for him to say, of course -- he retired in 2007 with a final salary of $4.2 million and a swag of shares worth $61 million. The bloke who took over from him, Mike Smith, was paid $88 million for his eight years of service -- over which time ANZ’s market value actually fell by 6 per cent. Where’s the value for the shareholder in that?

The banking lobbyists -- who I know and love so well -- will trot out the only argument they have: the Australian economy needs strong banks. And they’re totally right. The ‘net interest margin’ (the difference between what they pay on deposits and what they charge borrowers) needs to be maintained. Yet when four companies make a collective $30 billion in profits this year -- they’re in no danger of going broke.

Yes, we need strong banks, but what we need even more is strong customers.

The truth is that the banks are lying.

They can afford to give you an interest rate cut -- maybe even two or three.

You see, it costs your bank about $1,000 in marketing costs to replace you (and about six times that amount if you come via a mortgage broker they pay kickbacks to). That’s your negotiating power right there.

Here’s how to use it.On your way home from work, ring your bank and say this:

"I’ve decided to move my business over to Reduce Home Loans, who are offering me a comparison rate of 3.44 per cent. I’ve completed the online application, so can you please tell me what steps I have to do to move across my mortgage?"

This is a bluff, of course.Yet the bank’s sales team have strict targets (backed by incentives) they have to meet -- one of which is retaining profitable customers by giving them discounts to keep their business.

Sure it’s not as sexy as giving you a stock tip, but it works, and your gains are guaranteed.

Now let’s talk about another petulant child, Donald Trump.

Trump Says It's Time To Sell Stocks, Warns Of "Very Scary Scenarios" For Investors

Yes, you read that right.

The man who wants to be the leader of the biggest and most successful economy in the world is advising people to sell their stocks.

And maybe we should listen to him, because, like all things Trump does, he says he's the best.

While he’s admitted that he’s not much of a stock investor, he’s also claimed that 40 out of 45 of his stock purchases “rose substantially in a short period of time”. Analysis by Bloomberg suggests that if this is actually true it would rank him among the world’s top stock pickers.

More likely is that Trump is the Kim Jong Un of the stock picking world. The tubby leader doesn’t always play golf, but when he does he scores a hole in one, on every hole!

The world’s greatest investor of all time, Warren Buffett, is not having a bar of the Trump bulldust.

Says Buffett of Trump: “In 1995, when he listed Trump Entertainment and Resorts on the stock exchange, if a monkey had thrown a dart at the stock page, the monkey on average would've made 150% over the next decade. But the people that believed in him, who listened to his siren song, ended up losing well over 90 cents in the dollar. They got back less than a dime. I've really never known another businessman that brags about his bankruptcies.”

Yet maybe Trump has another angle for talking down the share market.

After all, according to S&P Global Market Intelligence, the performance of the Dow Jones in the three months leading up to a presidential election has displayed an uncanny ability to forecast who’ll win the White House. Historically, if stocks rise in price in the next three months, the incumbent party -- this year, Hillary -- wins the election 82% of the time. (And the opposite is true if stocks drop -- at least that’s what Donald’s banking on.)

Yet another reason to will the sharemarket higher.

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.