Macquarie Equities Limited's bombshell offer to set up a compensation scheme to any customer who ever received advice from one of its advisers should be a call to arms to the Abbott government to act swiftly on the crisis in confidence gripping the industry.
The fact that two of Australia's biggest financial institutions, Commonwealth Bank and Macquarie, are now on the hook to redress more than 500,000 customers who may have been victims of shoddy advice should send shivers down the spine of the regulator, politicians and David Murray, who is working on a final report into the finance system.
The brutal reality is this sector, which manages the life savings of millions of Australians, has been dogged by controversy for years.
A series of Fairfax Media investigations over the past 18 months has uncovered a sector riddled with forgery, fraud, widespread cheating on exams, management cover ups and low-ball offers of compensation. It has also exposed a regulator that has been too slow to act.
It explains why a recent study by Roy Morgan showed a lack of trust in the sector with only 28 per cent of people rating financial planners "very high" or "high" for ethics and honesty.
The crux of the problem is vertical integration, which is full of conflicts. The banks and AMP own or control more than 80 per cent of financial planners who flog their products.
Low standards of education have also contributed to the low ethics. Of the 18,000 planners in Australia, only 5500 are certified practicing planners. This is not good enough. Too many advisers have low levels of education and are not members of a professional body. This makes a mockery of the importance of the job.
The Commonwealth Bank financial planning scandal and an expose of Macquarie detailed by colleague Ben Butler and myself in recent weeks should give David Murray all the proof he needs to fundamentally address the problems with vertical integration.
It is something the future of financial advice reforms never addressed, but it is something that needs to be looked at as the country's $1.8 trillion in retirement savings continue to grow due to compulsory superannuation.
Macquarie's program comes hot on the heals of last month's announcement by the Commonwealth Bank that it would set up a compensation scheme to 400,000 clients of its financial planning divisions after a senate inquiry recommended a royal commission into CBA's financial planning scandal.
The corporate regulator, not Macquarie, held a press conference on Friday outlining the sheer breadth of the program, which involves Macquarie writing to 160,000 customers and informing them about a compensation program as part of an enforceable undertaking with the Australian Securities and Investments Commission.
If it wasn't real it would seem like we are all living in a parallel universe hearing from the corporate regulator that one of the country's biggest financial advice groups had poor compliance, its record keeping was "extremely poor" and there were concerns about its breach reporting.
Greens senator Peter Whish-Wilson summed it up well when he said: "Whilst it is a positive move for consumers that Macquarie Equities is putting in a place a system to provide redress for flawed financial advice, the scale of this contagion highlights the unresolved systemic failures."
There are differences between the Macquarie and CBA schemes, with Macquarie writing to all its customers while CBA has put ads in newspapers and on radio programs asking customers to come forward if they think they have a problem.
How long it will take both organisations to go assess the claims is anybody's guess, but we do know Macquarie victim Don Waller has been waiting 18 months for a response to his call for a review of his file.
