ROYAL COMMISSION INTO THE MISCONDUCT OF BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY
By Paul Nicol
The Royal Commission into the Misconduct of Banking, Superannuation and Financial Services Industry commenced early last year, and in an often drawn out affair, it is fair to say that by the time the hearings had been completed, significant reputational damage had been deservedly inflicted on the banks, AMP and the Financial Planning industry.
The final report and findings of the Royal Commission were delivered on Monday February 4, with the government committed to taking action on all 76 recommendations contained within the report. The report also referred some of the biggest company names to regulators for possible criminal or civil action for the way they treated their customers with NAB in particular being singled out for poor governance.
From a financial planning perspective, the key recommendations of the report included:
- The creation a new disciplinary system for financial advisers, with all advisers required to be registered. A single disciplinary body would oversee the system.
- That current grandfathered commission arrangements financial advisers have in place be removed as soon as possible. The Government has indicated it will end grandfathered commissions by January 1, 2021.
- The current cap on commissions for life risk-insurance products be reduced and ultimately set at zero.
- That financial advisers be required to obtain an agreement with their clients every year when charging ongoing fees for advice.
- The Royal Commission has also recommended that the law should be amended to require a financial adviser who currently does not meet the Corporations Act definition of “independent” disclose to clients why they are not independent.
Broadly speaking, we welcome all of the recommendations of the Royal Commissions final report, however, we are a little disappointed that the final report did not address the growing trend of vertical integration in the industry. Unfortunately, vertical integration has been rife with the banks and some financial advisers wearing the multiple conflicting hats of being a product manufacturer, administrator, investment adviser and financial planner. We believe that structural separation of these operations is required for true independence of advice.
Fortunately, as all of our clients know, GFM is a privately owned financial planning and accounting practice. As we have no association or affiliation with any financial institution, we are supportive of the findings of the Royal Commission with the banning of commissions and the lifting of adviser standards. Importantly, GFM is not a product manufacturer pushing the barrow of our product. Our objective has always been to conduct our business with transparency and to put the client first. Finally, it would appear, the industry is heading in the right direction to ensure these types of values become consistent in the industry.
Senior Financial Planner
SMSF Specialist Advisor™
Barron’s Top Financial Adviser 2017 & 2018
Authorised Representative No. 230876
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