AFCA chief executive and chief ombudsman, David Locke said, “AFCA welcomes the recommendations in Commissioner Hayne’s final report and the Government’s response. We believe these measures are critical to ensuring that consumers and small businesses are treated fairly.”

Specifically, AFCA noted Commissioner Hayne’s recommendation and the Government’s response on the establishment of a compensation scheme of last resort.

“AFCA and its predecessor schemes have long advocated for the establishment of a compensation scheme of last resort,” Mr Locke said.

“A compensation scheme of last resort is a really important back-stop that ensures that people who have been the victims of misconduct, and lost out through no fault of their own can finally be properly compensated. We look forward to working with the government to implement this important reform,” Mr Locke continued.

AFCA was established on November 1, 2018 and is a one-stop-shop that consumers and small business owners can use free of charge, for fair, independent and effective solutions to their financial disputes.

“The announcement from the Government today that AFCA will now be able to consider some of the legacy disputes excluded by the predecessor schemes going back to January 1 2008, means that many more people will be able to get access to justice and have their matters properly considered. This is a really positive step for consumers and we will be issuing guidance shortly to assist people to bring these disputes to us,” Mr Locke said.
 
AFCA also welcomed the Commissioner’s recommendation in respect of section 912A of the Corporations Act 2001, to require that Australian Financial Services Licence holders take reasonable steps to cooperate with AFCA in its resolution of complaints, by making available to AFCA all relevant documents and records relating to issues in dispute. This will enhance AFCA’s effectiveness as an independent external dispute resolution scheme for consumers and small businesses.

The Government announced that AFCA will also play an increased role in relation to remediation schemes that are run to compensate consumers. Mr Locke also welcomed this: “AFCA already has considerable experience of working on remediation schemes, and where we are involved at an early stage we are able to ensure that these are designed and implemented in a way that delivers fair outcomes for consumers. We welcome an increased role in this important work.

"AFCA will continue to work with our members to improve standards and minimise disputes, improving practices and achieving fair, timely outcomes for consumers and small businesses.

"AFCA is firmly on the side of fairness and we believe that ensuring fair outcomes for consumers is a critical first step to rebuilding trust and confidence in financial services."

A full statement can be found on the AFCA website: https://www.afca.org.au/news/latest-news/afcas-response-to-the-royal-commission-final-report/.

 
About AFCA
The Australian Financial Complaints Authority (AFCA) is a free and independent ombudsman service that resolves complaints by consumers and small businesses about financial firms. AFCA was established following the 2016 Ramsay Review into how Australia’s external dispute resolution framework could be improved to deliver effective outcomes for all Australian consumers and small business. On 1 November 2018, AFCA replaced the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal as the one-stop-shop for financial dispute resolution. Consumers and small businesses can lodge a complaint to AFCA online at afca.org.au, via email to This email address is being protected from spambots. You need JavaScript enabled to view it. or by phoning 1800 931 678.

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THE Financial Services Council (FSC) has released a statement on the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“The Financial Services Council welcomes the release of the Royal Commission’s Final Report,” FSC CEO Sally Loane said today. 

“Financial services is Australia’s largest industry sector, employing 450,000 people and managing almost $3 trillion of consumers’ savings.

“It must be free of misaligned incentives, mismanagement and poor governance, and focused solely on protecting the savings and growing the wealth of all Australians. Our financial services system must also be efficient and competitive.

“With the release of the final report and the Government’s response, we can now move even faster to repair the sector’s damaged reputation and ensure that consumers are able to trust each and every one of the people, products and services in our sector.

“Today all of us have an opportunity to rebuild the trusted relationship and the ties between financial services and the community that were once a bedrock of Australian life.

“We acknowledge it will take significant time and effort, and cultural change to effect thorough reform.

“Now we need to get on with the task of strengthening Australia’s financial services industry for the future so that we never end up in this situation again.”

The FSC strongly endorses the following recommendations, including:

• A person should be defaulted once into a superannuation account (rec 3.5)
• Retention of the twin peaks regulatory model (rec 6.1)
• Greater clarity around the co-regulation of superannuation by APRA and ASIC (rec 6.3)
• Industry wide reference checking of financial advisers (recs 2.7); and
• Regular reporting of serious compliance concerns to ASIC.
• Entities having a stronger focus on culture and governance (recs 5.6, 5.7)

There are number of recommendations and Government proposals which require further consideration and discussion with government and regulators. These include:

• An industry funded Compensation Scheme of Last Resort (Rec 7.1) This will only work if the underlying licensing system is strengthened to ensure licensees meet their obligations. We support stronger professional indemnity and capital requirements for licensees. These should be in place before any further consideration of a scheme of last resort. If this is not done it may even encourage inadequate products and services coming into the market that lead to poor consumer outcomes.

• Extension of the BEAR regime to all APRA regulated financial services institutions and extending it to non-prudentially regulated financial services firms (rec 6.6). While we agree with the Commission that there should be appropriate consultation on any extension, we would like to see how BEAR works for ADIs in practice before we consider any extension to the existing regime.

“The FSC will continue to consider the report in the coming days.”

www.fsc.org.au

About the Financial Services Council

The Financial Services Council (FSC) is a leading peak body which sets mandatory Standards and develops policy for more than 100 member companies in Australia’s largest industry sector, financial services. Full Members represent Australia’s retail and wholesale funds management businesses, superannuation funds, life insurers, financial advisory networks and licensed trustee companies. Supporting Members represent the professional services firms such as ICT, consulting, accounting, legal, recruitment, actuarial and research houses. The financial services industry is responsible for investing almost $3 trillion on behalf of more than 14.8 million Australians. The pool of funds under management is larger than Australia’s GDP and the capitalisation of the Australian Securities Exchange, and is the fourth largest pool of managed funds in the world.

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THE Financial Planning Association of Australia (FPA) is currently examining the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and intends on working proactively with the government to address its recommendations.

The final report highlights the need for strong consumer protection and oversight that build trust in the financial planning profession. The FPA acknowledged the examples of poor advice and misconduct identified by the Royal Commission were of deep concern and must be resolutely
addressed.

FPA CEO, Dante De Gori said, “The FPA is committed to a better outcome for people that have not received professional, sound and ethical financial advice. People want to know who they can trust with their money; they deserve trusted and transparent financial advice that is unequivocally in their best interests as the client.

“The FPA expects its 14,000-plus members to demonstrate the highest standards of conduct and ethical practice, and of course abide by every relevant letter of the law. We provide a wide range of ongoing opportunities for our members to learn, improve and advance in their
professional capabilities and knowledge for the benefit of their clients.

“We will continue working with our members towards further improving education and professional standards of financial planners. We have recently conducted a voluntary internal audit of our Conduct Review Commission disciplinary processes and made them more transparent.

"Reflecting Commissioner Hayne’s concerns, a separate legal entity has been established called Code Monitoring Australia to ensure true disciplinary independence.

“We believe change in the financial planning profession will ultimately result in better outcomes for all Australians,” said Mr De Gori. “It is our objective to help create the environment that will enable all Australians achieve a more secure financial future.

"It will take time to review and absorb the full implications of this final report, but in principle, the FPA is committed to working cooperatively with the government and its current and future representative bodies to support the growth of our profession for the benefit of consumers,” Mr De Gori said.

www.fpa.com.au

About the FPA

The Financial Planning Association of Australia (FPA) represents the interests of the public and Australia’s professional community of financial planners. The Association is unrivalled in its reach of the financial planning market, influence on government and regulators, standards set
through a world-class Code of Professional Practice, unique position as the certification body in Australia for the global Certified Financial Planner designation, and reputation for quality professional development. With a growing membership of more than 14,000 members and affiliates, the FPA is home to Australia’s 5,700 CFP® professionals. Building on a 20-plus year legacy, the FPA represents the changing face of the financial planning profession.

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INDUSTRY Super Australia (ISA) said the Banking Royal Commission has shone a welcome light on serious conflicts within the financial services system and validated the important role industry and other profit-to-member super funds play in safeguarding Australians’ retirement savings.

ISA said the Royal Commission’s final report had correctly diagnosed the root causes finding: “in almost every case the conduct in issue was driven by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain…” (p1 Volume 1).

ISA said the structure of industry and other profit-to-member super funds has avoided such conflicts resulting in scarce evidence of misconduct or conduct falling below community expectations.

"However in assessing the recommendations they appear to stop short of systemic reforms suggested by some to address conflicts of interest at the heart of most misconduct," the ISA said.

"Instead, the report has opted for a series of changes to existing laws and stronger enforcement.

"Taken as a whole the proposed changes should in most cases lead to better outcomes for consumers but only time will tell whether ongoing conflicts of interest and remuneration settings will result in problems re-emerging.

"Turning to the specific recommendations on super, ISA agrees they should improve outcomes by prohibiting unsolicited sales of super, stronger penalties for trustees, annual renewal of advice fees and ceasing grandfathered commissions to stop fee for no service gouging.

"Industry super funds also support steps to reduce multiple accounts and development of mechanisms such as automatic rollover to prevent more than one default account being created for members.

"Surprisingly the final report does not appear to recommend any specific prosecution action arising from the evidence and case studies it explored. It would appear it is in the hands of ASIC to determine if misconduct is pursued through the courts."

ISA deputy chief executive, Matt Linden, said that by shining a light on the system’s deeply entrenched problems, the findings could prove the vital catalyst for long overdue reform. 

“That not-for-profit industry superannuation funds have emerged from the process relatively unscathed, is vindication of our governance structure and member-first ethos,” Mr Linden said.

“As a whole, the system must be more transparent and more accountable – it shouldn’t take a Royal Commission for workers to see whether their retirement savings are in safe hands or not.

 “The onus is now on the Parliament and industry to ensure superannuation works in the best interest of fund members – not that of shareholders or bank executives,” Mr Linden said.

Industry Super Australia provides policy, research and advocacy on behalf of 16 not-for-profit industry superannuation funds with around six million members.

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