DO THE recommendations of the Hayne Royal Commission go far enough to prevent parts of the banking and financial service industries “backsliding” again?
Council on the Ageing (COTA) chief executive Ian Yates says the 76 recommendations of the main report require careful consideration; but in the meantime he has called for bipartisan political support to implement the recommendations that protect and strengthen consumer rights.
Mr Yates welcomed the commissioner pointing out the gaping “asymmetry of power” between financial services providers and retail consumers, and his emphasis on the obligation of governance entities and senior management to ensure an organisational culture and practices that encourage and reward honesty, diligence and commitment to the interest of customers – and for the law to punish bad practice.
“We strongly welcome the recommendation to end remaining conflicted remuneration for financial advisors by abolishing grandparenting arrangements that protect commissions in place before the Future of Financial Advice legislation, but we note that asset-based commissions still remain, and in COTA’s view should be similarly outlawed,” Mr Yates said.
“The recommendation to legislate that intermediaries, such as brokers, must act in the interests of the customer or purchaser, should be implemented forthwith.”
Mr Yates said his organisation also supported the proposed removal of the exemption of “point-of-sale” retail dealers from the National Consumer Credit Protection Act – “which had perversely exempted retailers who sold virtually worthless policies” – and the proposal to make the “hawking” of all financial products illegal.
Although the commissioner had mentioned the need to support consumer voices in the financial system, Mr Yates said unfortunately it makes no explicit recommendations about this.
“The industry’s not going to become angels overnight and strong consumer voices are needed to draw issues and problems to the attention of the wider community,” he said.
University of Sydney researchers say the royal commission will have a “monumental impact” on the banking, superannuation and financial services sectors.
They also hope it will provide the industry with “clear guidance on ways to enhance its integrity”.
And according to the university’s Business School senior lecturer in finance, Andrew Grant, the commission has also focused attention on a severe lack of financial literacy among the Australian population.
“Although Commissioner Hayne has already sought to ensure, among other things, more responsible lending in the future, it is highly important that consumers are aware of the risks of entering into any financial agreement,” Dr Grant said.
Sydney Law School professor of corporate law, Jason Harris, said the report should also be a strong wake-up call for corporate regular ASIC to “change its approach to enforcing the law and taking on the tough cases”.