Brent Sheather is an Authorised Financial Adviser and a personal finance and investments writer.

This week's story is about our old friends "the banksters".

Day after day they have been hitting the headlines overseas and even by their standards the news has been bad. It seems that, whereas back in the 1930s the world's most notorious criminals used to rob banks, nowadays they run them.

In the US Wells Fargo made the papers for falsifying customer accounts to meet sales targets and Goldman Sachs has been allegedly hiring prostitutes for clients whilst at the same time losing them billions.

Closer to home, in Australia, a number of banksters have reluctantly appeared before Parliament to answer accusations of bad behaviour and hopefully pre-empt a Royal Commission which might turn up all sorts of problems.

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There hasn't been a great deal of coverage of these issues locally but as the Australian banks "own the NZ finance scene", in more ways than one, the issues have some relevance here.

So let's have a closer look at what some of the world's leading financial institutions have been up to of late.

Searching Goldman Sachs (GS) on the Financial Times (FT) website is usually good for a laugh or two. Apparently GS got the job of advising the Libyan Investment Authority (LIA) on investing and having a good time in London.

Despite putting client's interests first at all times the results were, how should we put this diplomatically, disastrous.

The FT reports from London's High Court that the LIA is claiming that Goldman Sachs exploited its limited investment experience and subsequently, within a year, the LIA lost its entire US dollar $1.2bn investment whilst Goldman earned US$200m in profit from the transactions.

The court heard "the lurid details about a Goldman Sachs banker procuring prostitutes to develop ties with the LIA" and incurred expenses of £22,000 for hotels and entertaining LIA executives on one trip to London.

At the same time the court was told that GS was describing the wealth fund privately in emails as being so unsophisticated "anyone could rape them".

Goldman is defending the LIA law suit and has denied the claims." Not to be outdone Goldman competitor Morgan Stanley was accused by US securities regulators of running an unethical sales contest to cross sell banking business to broking customers.

According to the FT the regulator said the bank had been pushing financial advisors to persuade clients to adopt a leveraged equity strategy through margin borrowing from Morgan Stanley against the value of their existing share investments.

That leads us to Wells Fargo (WFC) which has run into major problems with cross selling too. US regulators found that WFC had set up 2 million fake accounts to meet sales targets and believe that cross selling activities have lead to widespread consumer harm.

Predictably WFC directors deflected the blame from themselves and instead blamed dodgy junior staff for opening up the unauthorized accounts to meet cross selling sales goals.

WFC got hit with a USD$185m fine but more significantly investors are now worried that its business model is broken. WFC has, according to the FT, pledged to the regulator that it will now scrap all product sales goals for its retail banking staff.

We don't have space to discuss Deutsche Bank's efforts to put client's interests first (US$14bn fine to settle a mis-selling case) or HBOS (£266m fraud involving foreign travel, expensive gifts and sexual encounters with escorts) or local bankers ill-advised cameo roles on Real Housewife's of Auckland.

What's the problem here?

It's not, as WFC directors said, the fault of dodgy junior staff.

The problem is far more insidious as Financial Times columnist, John Gapper, wrote: "Wells Fargo placed intense pressure on employees to hawk products to customers leading them to fake as many as 2 million accounts. Their customers had to be persuaded to hold not only loan and current accounts but also credit cards, mortgages, insurances, investment accounts and other financial products".

There are some tentative moves in the right direction in the regulation scene overseas.

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The reason for this activity is simple - these products are far more profitable than recycling deposits into house loans. This bad behaviour is made possible because retail and investment banking is under the same roof. The investment banking division of many financial organisations views retail investors in much the same way as Goldman Sachs allegedly viewed the LIA.

In my thirty years in the finance sector I have seen institutional desks dominate retail many times but the following example is a particularly good one.

A stockbroking firm, incidentally which one of the FMA board has previously worked for, sold a client of mine who also dealt with that institution, a 100 year bond issued by General Motors (GM).

At the time the client was aged about 73. In my view the only reason the institution sold the retail investor the 100 year bond was because GM was paying the institutional side of the bank to underwrite the issue. It made no sense for his investment portfolio whatsoever. The elderly man wasn't even aware it was a 100 year bond but once it was explained to him he sold the bond and terminated his relationship with that company.

Meanwhile the Australian banks have come in for criticism, for much the same reasons as their overseas counterparties. Bloomberg reported the other day that "there are numerous allegations levelled against the countries big four lenders -

• They are a cozy cartel that fails to pass on interest rate movements to borrowers or depositors (in NZ credit card finance costs 20.95% when inflation is barely 2%).

• They are a bunch of predators using sharp practice and giving improper financial advice to clients (nothing new here).

• They have been rigging the country's interest rates (popular overseas too).

• lastly, their executives are paid too much (as a result of the 3 points above).

What needs to be done?

There are some tentative moves in the right direction in the regulation scene overseas. First and foremost both Hilary Clinton and the Donald have said they will look at reintroducing some version of the 1930s era Glass Steagall Act which could force financial institutions to split their investment banking operations from retail banking.

In the absence of proper regulation this is probably the only way of getting a fair deal for retail investors both overseas and locally. It means, for example, when someone rolls into a bank to get KiwiSaver advice the sales person can actually put the clients interest before that of their employer because their employer isn't compromised by owning their own fund manager that they make more money by directing their clients into. Instead the salesperson can choose from a broad universe of options and that would presumably include low cost options.

Now a reasonable person reading the above might well conclude that many senior bankers need to be watched closely as they clearly have a pre-disposition to bad behavior, at least where other people's money is concerned.

So who does the job of the policing bankers locally?

In NZ that task falls on the shoulders of the Financial Markets Authority however, paradoxically the Government has seen fit to populate more than half of its directors with past/present bankers.