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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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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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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GREATER consumer protections, increased penalties for law breakers, expanded enforcement powers for regulators and industry-wide legislative simplification are among sweeping changes recommended by the Royal Commission into the Banking and Financial Services Industry.

The Law Council of Australia has welcomed the recommendations, which will have a far-reaching impact on the banking and financial services sector, ensuring consumers are treated fairly and honestly, in accordance with key principles of the law.

Law Council President, Arthur Moses SC, said the Royal Commission had shone a light on misconduct – some potentially criminal – in the banking and financial sectors, providing a unique and important opportunity for reform and renewal.

“Australians were rightly shocked by some of the stories heard during the extensive Royal Commission hearings – of profit being put before people and in some instances the rule of law,” Mr Moses said.

“The recommendations put forward by Commissioner Kenneth Hayne have placed consumers first and established a roadmap with the potential to set the path straight into the future, ensuring banks and those providing financial services are held to account.

“Central to the Law Council’s submission was the call for simplification of complex laws, making them easier to understand and administer and we are pleased by the recommendations supporting this shift.

“The ‘clear need’ for the disadvantaged to access financial and legal assistance to deal with disputes on equal footing with large financial entities was highlighted in the final report.

“Many of the cases before the Royal Commission involved matters where individuals were unable to pursue their rights because of an inability to access legal assistance. This resulted in injustices occurring and wrongdoers going undetected.

“We reiterate our calls for the Federal Government to ensure predictable and stable funding for the legal assistance sector, so all Australians can access justice,” Mr Moses said.

The Law Council summed up the recommendations as:

Changes designed to protect consumers, meaning

• banks would be prohibited from paying commissions to mortgage brokers, which would be paid by home loan borrowers;
• brokers failing to 'act in the best interests of the intending borrower' would be liable to civil legal action;
• prior to giving advice financial advisers will be required to disclose conflicts of interest in a written statement; and
• a compensation scheme of last resort for those with a 'viable claim' would be established in congruence with a government-appointed panel reviewing external dispute resolution and complaints arrangements. 

Increased penalties for those breaking the law, including

• criminal penalties for financial services and credit licensees for failure to report a contravention as and when required;
• the introduction of additional civil penalties for financial services and credit licensees for failure to report a contravention as and when required;
• breaches of industry codes of conduct would constitute breaches of law; and
• civil penalties for breaches of superannuation trustees’ and directors’ covenants set out in the Superannuation Industry (Supervision) Act 1993.

Expanded enforcement powers, meaning

• ASIC should first consider the viability of court action before other enforcement tools such as infringement notices or enforceable undertakings;
• the establishment of a new disciplinary body for financial advisers, requiring registration, reporting of “serious compliance concerns”, and allowing reporting by clients and other stakeholders;
• ASIC would become the conduct regulator for the superannuation industry; and
• ASIC enforcement staff would be required, where possible, to avoid informal contact with members of the banking and financial services industry.

The Law Council noted that measures to simplify existing law require clearly definition of generally applicable norms of conduct to ensure the removal of exceptions and qualifications in law are appropriate. 

"We reiterate our recommendation for a referral to the Australian Law Reform Commission to develop propositions for simplification and related matters," a Law Council spokesperson said.

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