Appearing before a parliamentary committee on Friday (8 November), Mr Comyn was asked about the bank’s decision to retain its advice business.
“We do think it is important to be able to provide that service to customers. We worry about the unavailability of effective and safe and simple advice to customers over time,” Mr Comyn said.
While he admitted that there have been plenty of scandals within CBA’s financial planning arm, Mr Comyn said the bank has made changes to improve its advice offering.
“It is certainly a very challenged business at the moment,” he said. “I can certainly understand why some institutions would exit it. Our concern is what will the future of financial advice provision be in Australia and what might [be] the impact of a smaller advice industry and far fewer customers being able to either afford or access financial advice.”
The CBA boss pointed to the UK advice market, where substantial reforms were implemented. The Retail Distribution Review (RDR) began in 2006 and concluded with new remuneration rules published in 2012.
“A decade on, I think a number of policymakers there are wondering whether that was a good thing, given far fewer people have taken out products like life insurance,” Mr Comyn noted.
“We need to consider how we can develop a safe proposition, either using the model we have in place today, or, I would hope we would be able to develop over time an even simpler service that leverages technology and consistency and is able to deliver a basis service that I think frankly would serve at least 80 per cent of Australians very well.”
Also appearing before MPs was Westpac chief Brian Hartzer, who explained that financial planning has been unprofitable business for the bank for a long time.
“We concluded that it was uneconomic to meet all the compliance around it and earn a reasonable return,” he said. “I regret that, because I continue to believe that providing financial advice to Australian consumers is important and that all Australians should have access to good, cost-effective, unconflicted financial advice.”
Mr Hartzer also made comments about “the challenge of red tape” for small businesses and noted that regulation can have “unintended consequences” for customers and the broader economy.
“One of the biggest issues that we have seen is where you have unintended consequences of regulation. We have certainly seen plenty of examples where if something is rushed and the consequences aren’t fully thought through, that there can be negative impacts on customers and the economy,” he said.
I am sure he means general rather than basic or is he now renaming it? He is correct in that the provision of advice is now unaffordable to “mum and dad Australians” however the solution is not a CBA term deposit or index fund with high ongoing fees. It is less unnecessary compliance which does not protect the client but makes it more expensive to give the advice.
OMG, these big wigs from the big 4 banks just infuriate me with their absolute hypocrisy of how ‘things should be run’.
Peoples, I can tell you from first hand experience that anything (and everything) they do, be it externally or internally is done with no regard for outcome other than money and greed. And that includes their core business – as well as what they’ve done to the financial planning and insurance sector.
I know of so many examples where bank staff have been are treated terribly despite them bringing millions of dollars of revenue in to the bank. RE’s / RM’s (sales guys) having bonuses in the tens of thousands of dollars being withheld simply because they had 3 speeding fines over a 12 month period; good quality and highly professional staff being bullied and racially vilified by senior managers to the point where they’ve gone out on mental health leave; staff attrition rates for managers being in the high 90% rate as a result of that behaviour yet it was all swept under the carpet because budgets were being met. Today, I know of major successful companies with spotless credit records and enormous bank balances in the millions being ‘tossed out’ on the street here in Victoria simply because some CBA idiot up in Sydney made an error with a client of the same industry which cost the bank $500-750 million.
I could go on and on and on about how poorly run the CBA is (as well as the other major banks) so to hear clowns like this offering their advice on how the financial planning and insurance sector should be run, makes me so angry.
They have no clue or conscience whatsoever and I strongly suspect none of them have ever been in front of clients themselves. Anything that any of the Big 4 banks heads say, should be completely ignored. They need to clean their own filthy backyards up before offering any advice to the rest of us.
They don’t need ‘simple’ advice from a machine. They need well structured and tailored holistic advice from an adviser without compliance hurdles making it cost too much to access.
You’ve had your turn Matt and you all f@cked it so stick to writing home loans and lending to businesses.
Will the banks now be lobbying politicians as vociferously for a correction as they did for the destruction of the advice industry? Or is it just a matter of some choice sound grabs in IFA…
[quote=Anonymous]Well, it destroyed their reputation and cost them billions in remedies. Yes, compared to their size they could bear it but look at AMP to see what a billion here and a billion there means in impact. Pretty soon you are talking about real money.[/quote]
you mean, it destroyed billions in shareholder value, it destroyed many thousands of ordinary Australians. it didn’t cost cba executives anything. it’s the shareholders who ultimately pay, it’s the public and other stakeholders (like IFA’s) who ultimately pay.
what did the CBA executives suffer other than mild irritation from questioning at the RC? even that wasn’t bad, comyn just blamed mortgage brokers instead.
the answer is nothing. even terry suffered more than they. he lost his business. when you consider the enormity of the issues at CBA and Dover it’s not even in the same ball park. yet comyn is the one giving us lessons after what he has been party to.
get lost.
so we all know the problems, messrs. Comyn & Hartzer…. we have terrible “solutions” that are making the bad, worse. What we need is real leadership from informed people (not insto’s) who actually comprehend the detail as well as the big picture. Then, a government that listens, contemplates, then acts. too many uninformed people got us here… they cannot be trusted to lead us into the promised land…. to continue the metaphor, we are being led into a rough sea and no parting of the waves likely.
The elephant in the room that ASIC and the banks are missing is that consumers trust in institutions is waning and these institutions are increasingly out of touch. Their solution is some sort of technological solution marketed directly to the consumer. The average client does not simply want advice, they want ongoing service and support. Dealing with Centrelink,the ATO,nursing homes, fund manager communication,budget announcements,political party proposals etc is a minefield for most and advisers play a huge role in being their clients advocates and providing ongoing service not just advice.
And hear lies the problem. The parliamentary committee is hearing from uninformed conflicted personnel like Matt Cormyn and Brian Hartzer who know nothing about financial advice and have no idea what the consumer needs. They have removed themselves from advice so stop asking these sideline commentators what is good for a profession they have never understood and only saw dollars in.
How about you actually to speak to the director practitioners of our largest Australian Financial Planning practices (who are dealing with consumers every day and run professional advice businesses) and get a real insight on the impact of the royal commission and an overzealous regulator
Unreal!!! The big guys bail out but still stick their noses in the sand pit. Bugger off you people, you are out of the game and therefore have ZERO right to offer any input. Planners and clients decide on the appropriate level of advice, so take your “” basic and robo ideas “” and walk away. You all sound like someone after a divorce but still have not cut the strings. You people have done the damage so just shut up and disappear and let the profession sort it all.
Amanda, you’ve hit the nail on the head with your comment.
“We concluded that it was uneconomic to meet all the compliance around it and earn a reasonable return,” he said. “I regret that, because I continue to believe that providing financial advice to Australian consumers is important and that all Australians should have access to good, cost-effective, unconflicted financial advice.”
Well, you’re not alone. Most have concluded that same thing.
What’s that the FPA says, but this is how you become a profession…LOL.
Unintended consequences of regulation….gee I wonder why. Average Aussie ain’t my market anymore.
Has he learned nothing from the RC?
The banks charged very high prices for their advice and couldn’t make it work or only make it work by creating an environment that yielded scandal after scandal.
New life insurance applications are dropping steeply but going back to the old model of sales by riskies (million dollar roundtable anyone?) won’t work.
The new approach of creating very large amounts of compliance and red tape around financial advice is not working either. Changing the life insurance commission incentives to paying less up front and more later seems to have been a disaster even though that is clearly the way to go.
Not easy.
[quote=Amanda Hugenkizz]They are like hit and run drivers. They’ve done immense damage to the advice industry and then merrily driven off with no thought or worry for those planners remaining. Off they go into the sunset whilst we’re left buried in their departing dust of compliance and red tape, crippled with FASEA and annual optins etc etc.
it’s the best. there is no accountability. pay a few fines which are relatively small in the context of their size. don’t have to follow the law, it’s a choice, every now and again make a concession and sign and EU, rinse and repeat.
ha ha, and then you leave a massive noose around the necks of your competitors ala the small IFAs who are just drowning. smell ya later muchachos c ya
regulators and legislators have no idea, by the time they catch on to what just happened, the execs have sold up all their shares and moved on elsewhere to do the same. best game in town. untouchable.
In very simple terms, what Matt is actually saying is that advice has now become very expensive (due to compliance hurdles) and that the people who need advice the most, will not be getting it.
Can I make a suggestion to Mr Comyn that the IFA market is more than capable of providing to the advice needs of the Australian consumers. Banks have destroyed the Financial Advice Industry an the Australian public are now going to pay for this for years. You should concentrate on banking and fixing the culture and remuneration practices within your organisations. What has happened in recent years within the bank industry happened some 35 years ago within Lloyd’s of London and it almost destroyed that institution and similarly the many Merchant Banks that have come and gone since then have all overdose on an excess of self interest. Learn from history stick to you knitting and fix the culture and values within the bank from the top down
just a mess…
They are like hit and run drivers. They’ve done immense damage to the advice industry and then merrily driven off with no thought or worry for those planners remaining. Off they go into the sunset whilst we’re left buried in their departing dust of compliance and red tape, crippled with FASEA and annual optins etc etc. When caught up with, they throw a few comments out to benefit there new business direction; that being web based applications. Yet another proud member of the FPA’s professional partner program “helping to drive the direction of advice in Australia”.
Well, it destroyed their reputation and cost them billions in remedies. Yes, compared to their size they could bear it but look at AMP to see what a billion here and a billion there means in impact. Pretty soon you are talking about real money.
Banks and other instos like “hit and run drivers”. Great analogy. Left all the damage and trauma behind them and off into the sunset like innocent little angels.
I always said they should never have gone near financial planning and advising with a barge pole.
Completely outside of their core business and had no idea.
The industry is now paying the price in large dollops.
No shit