Much was made in the media earlier this year about the Royal Commission into the banking and finance sector. Originally brought about as a result of ongoing dishonest practices, and generally not acting in the best interests of the consumer, the Royal Commission was conducted to detail ways in which integrity can be brought back to the sector.
The report handed down by High Court Justice and royal commissioner, Kenneth Hayne, provided a damning insight into an industry that affects so many Australians. In all, 76 recommendations were detailed in the report, taking in key aspects of the banking, superannuation, financial advice rural lending sectors.
Now, months after the report was handed down, the various sectors appear to be making appropriate changes to ensure the poor practices of years gone by are banished. This can only mean a better deal for the average Australian.
Below, we touch on the salient points from Justice Hayne’s report:
- Responsible lending practices – expand the Banking Executive Accountability Regime laws to track those responsible for any breach of lending laws to reduce the incidence of irresponsible lending.
- Financial advice – Create a new disciplinary system for financial advisers, with all now required to be registered, and a single disciplinary body overseeing the system. All banking licence holders would also be required to report ‘serious compliance concerns’ about individual financial advisers to ASIC on a quarterly basis. The proposed changes set out in the report are designed to ensure greater accountability in the financial planning industry, ensuring consumers are provided with accurate, and the most appropriate, advice.
- Superannuation – The heavy handed selling of superannuation is to be abolished, with a single default super fund also created for all workers whereby people are “stapled” to a single default account. Justice Hayne was intensely critical of significant fees and charges imposed by various super funds, eroding the retirement savings of many Australians.
- Insurance – As above, the coercive selling of insurance products would be abolished. A cap on the commission that can be paid to car sellers for add-on insurance products is to also be imposed.
- The regulators – ASIC and APRA are retained, however, they are to be overseen by a new independent authority that would assess the two regulators to ensure they’re carrying out appropriate responsibilities. ASIC is to also overhaul its approach to enforcement, with a focus on court action rather than infringement notices.
One may argue that it’s unfortunate such a royal commission was necessary, however, what Justice Hayne’s report has done is highlight specific areas for drastic improvement within the country’s largest industry. No longer will consumers be taken advantage of, which all things considered, is the most important result.