We hear a lot about people getting ripped off by banks, financial planners, builders, mortgage brokers, real estate agents, tradesmen…the list goes on and on. One could be forgiven for thinking that our entire society is based on ripping one another off.

In the US and Europe, companies are fined billions of dollars for negligence and custodial sentences are handed down to the individual perpetrators – except in the case of the GFC where apparently no banker was to blame.

In Australia, a bank acting against the spirit of corporations law and where breaches are proven may receive a fine in the thousands of dollars. To the best of my knowledge no banker has gone to jail over the recent scandals at a few of our banks. Note I’m talking about Corporations Law as administered by ASIC not the criminal code (which encompasses fraud, money laundering etc).

Let me make it very clear…I don’t think banks set out to rip people off. Sure, there are the actions of the odd individual that are criminal but these people are usually caught and sent to jail.

Forget a Royal Commission into banks that’s just a waste of time and money. In our line of work we meet people that are the victims of bank negligence. The reason they (the banks) do it is because there are no real or lasting consequences.

In any event we’re a forgiving lot.

Look at the CBA financial planning scandals from a few years ago. How many people changed banks because of them? They’re still turning over record profits. No-one’s gone to jail and no-one is likely to.

That’s because many of these investigations are handled by ASIC. ASIC’s powers of fining are almost a joke. They’re meaningless. Sure, they can heavy a mortgage broker or a financial planner but taking on the banks? They’re just not resourced to do that.

As the banks giggle at the fines being meted out by ASIC, it may be long overdue to consider custodial sentences. To throw the cat amongst the pigeons, this proposed punishment/deterrent should be for all individuals between the perpetrator and the relevant board member inclusive.

Their actions need to be investigated and – if found negligent or collusive – serve a minimum custodial sentence as well as a personal fine commensurate with what they have been paid. Once a custodial sentence has been served the individual is to be banned for a period of time from partaking in the industry.

I’m not a betting man but if I were I would bet that the number of these headlines will diminish to an almost negligible to zero range.

That’s the banks taken care of but what about asking the question that we’re all too polite or afraid (in the financial industry) to ask?

When is it your fault for being stupid or careless with your finances?

When does the client take responsibility for their financial gamble?

Let me paint you a scenario.

We’ve had a property boom in Sydney and Melbourne for almost eight years now. If history is any guide that boom – which saw many properties double in price (and more) – will have to come to an end sooner or later.

So, if you meet a property spruiker that shows you past performance and suggests this will continue you should seek independent financial advice. You know, just to double check that the person selling you the property – who is rewarded for selling you that property – is acting in your best interests not theirs.

You’d be amazed how many people fail to do just that. We’re now seeing some very bad financial outcomes as these properties – which were acquired off the plan 12-18 months ago – are now failing to settle because banks now don’t like the postcode, the developer or the individual building.

Don’t misunderstand. The property spruiker (and I’m not talking about licensed real estate agents here) has every right to do what they’re doing. Surely, you have a responsibility to cross check their advice.

Amidst all the ASIC investigations and political witch hunts of banks we appear to have lost sight of something called the bullshit detector that we used to pride ourselves for.

There will be more and more stories like this in the coming months as the smaller banks with cheap pricing face the possibility of outstripping their funding limits. Their home loan buckets in certain postcodes will be overflowing and they will simply stop writing loans for that market.

This is when the safety of the major banks with their massive books and diversification protects the population against small oversupply areas. For a while. That’s one of the reasons why they charge more.

If the past week is anything to go by, the property boom is well and truly over and the correction (in apartments) is upon us.

The never-ending bull run in property is coming to an end. People have lost sight of the type of investment property is…long term. Property is not like shares where you can instantly buy or sell. It is an illiquid asset. We have forgotten this because of the boom in property over the last few years. Now things are becoming more normalised we need to adjust our investment/reward horizon accordingly.

Before you go spending your hard earned, seek independent financial advice. If you don’t know how, ask us and we’ll refer you to people that we work with. If we profit from that referral, we have to disclose it to you.

There is also a moral responsibility to our clients that businesses should possess and adhere to.

I say this because when people lose $50k or more, it puts a tremendous strain on them.

We’re comfortable with the ethics that we employ in our business. We warn, we say no a lot but we can’t temper unbridled avarice dictated by financial illiteracy and fiscal ineptitude. Particularly if these people are receiving conflicting advice from the people they’re buying from and they choose to only listen to advice that fits with their mindset and an imagined unachievable return on their investment.

All we ask is that you listen to our combined 45 years of experience in finance. If you don’t and you lose your money, we’ll be upset but will be able to sleep at nights.