Having been through more inquiries and witch hunts in the past few years than almost any other industry, most financial advisers understandably bristle at the prospect of a royal commission.
True, it would probably arm the industry’s enemies with ammo and in the short term may even further wound it’s reputation.
But on the flipside, such an inquiry could also serve as a process of catharsis after a very difficult couple of years, and could result in blame finally being placed at the feet of the fat cats that created and perpetuate vertical integration, not their so-called ‘distribution force’.
The problem with all the inquiries we have already had is that they either focus narrowly on advisers – education and professional standards for example – or on the overall state of the financial system.
The Ripoll Inquiry and subsequent FOFA wars did look at the elephant in the room, but they resulted in legislation that was more focused on fee disclosure than ownership disclosure i.e. focused on advisers, not what ASIC calls their ‘controllers’.
We are yet to have a meaningful process that gets beyond blaming advisers to look at the structural impediments to sound advice – the executive bonuses, volume rebates and soft dollar incentives we all talk about over beers and know continue to exist in the major institutions.
You only need to look at Bill Shorten being implicated by the Royal Commission into Trade Union Governance and Corruption to realise the great benefit of these types of inquiry.
Compared to run-of-the-mill parliamentary inquiries, an independent probe of this kind would have greater powers to compel the insto advice bosses to face the stand and explain that they have traditionally seen advisers as nothing more than a salesforce, rather than as a professional class of client-centric advisers.
With IOOF now being added to the list of major advice providers under the regulatory microscope, calls for a royal commission from both sides of politics are getting louder and there are signs that even Coalition MPs – traditional advice allies – are beginning to flip on this issue.
For too long, advisers have been blamed for product failure and dodgy incentives implemented further up the chain.
Almost all of the industry’s problems were created in skyscraper boardrooms, not streetfront advice practices.
A royal commission would be painful, but it may ultimately be necessary to expose the truth once and for all and begin the process of rebuilding consumer trust.
[quote name=”Old Risky”]
The RC would only work if the banks and ASIC had no input into the Terms of Reference. Too many hidden agendas and empires to protect otherwise[/quote]
Given the amounts contributed by the VI criminals to both parties, this would be extremely unlikely.
This issue has always been systemically, rather than individually based. There are the small percentage of rogues in all walks of life, who will continue to spoil things for the vast majority of those who endeavour to “do the right thing”, but since my tenure at one of the four majors as a financial planner, even blind Freddy could tell you the problems with the financial services industry in general would eventually surface.
Does a witch hunt, sorry, Royal Commission achieve a desired outcome? Perhaps. But whilst we’re on Royal Commissions, let’s have one for the media who continue to make the news and not report it.
I have never in my life read such inflammatory and misleading commentary from a so-called “reputable journalist” (isn’t that an oxymoron?), Adele Ferguson. An ego let loose and gone wild on the euphoria of her reporting on the CBA debacle.
Can everyone just please take a “chill pill” and let the adjudicators (ASIC, APRA and PWC) do their job. When we eventually get the facts, let’s then see if a Royal Commission is needed.
I have to say that Aleks’ argument is a compelling one. A Royal Commission could look into things like why are ‘consumers’ interests protected by FDS & Opt-In provisions under FOFA that DON’T apply to millions of members of Industry Funds? Perhaps the fees paid to ISF Trustees (many of whom now sit in Parliaments across the country) and amounts spent on advertising will finally see the light of day.
Seriously, though, how much more damage could one do to advisers reputations?? We have been the scapegoat for everything from the GFC to product failures – things we have no control over.
Bringing the activities of product manufacturers and vertically integrated businesses into the cold, hard light of day may actually help the average punter understand that just because advisers are at the point of sale for financial products, it doesn’t mean we are the ones that should be blamed for product failures.
A royal commission will bring the industry funds under the microscope as well as the big guys. If we have one, then the need for band aids will cease ONLY if the management are put on stage as well. We all know, apart from rouge advisers who are let loose by management that the same people-management- are the problem at a much higher level. If a clean up is to be successful then start at the top and don’t let them hide by controlling terms of reference. Advisers get shot for behaviour going back years- apply the same rules to all involved. In the meantime, advisers don’t hold your breath in anticipation but just keep on with what we do best–advise!!!!!
Well considered and well written Aleks, as usual. #PerceptionCorrection
#7 Old Risky.
One of the key Terms of Reference agreed to by members of the LIAWG was to “Provide a unified response to the identified issues”.
Terms of Reference are the governing objectives and if they are breached, it surely therefore must result in any subsequent recommendations being deemed redundant simply as they may be seen as a view of only a portion of the particular group, rather than a unified and agreed response. Breaching Terms of Reference surely destroys the integrity of the process.
The LIAWG despite the best of intentions, could surely not be relied upon by Trowbridge as there was obvious disunity within the group, differences of opinion and conflict as to how critical information was distributed either among the group or between certain members only and not others.
At that point, the LIAWG should have been abandoned and the whole process re-assessed and re-considered.
Consequently we have had an unworkable report produced determining the future of the industry, but based on the evidence of a working group that was not unified in it’s position.
Nobody needed a Royal Commission more than the CBA/CFP. Their leadership team brought down the industry IMO. Those so called “fat cats” have scattered to other jobs. Lets get their names and get to the bottom of their wrong doings. Does anyone feel any better that these people are now working for other companies probably repeating the same unconscionable behaviour elsewhere.
As I said in another forum, and as is clearly in evidence with the FSC Twowbridge fiasco, the banks and the regulator are of the same mind, apparently despite the obvious proof that vertical integration and management bonuses of bank upper management delivered poor PERSONAL ADVICE
The RC would only work if the banks and ASIC had no input into the Terms of Reference. Too many hidden agendas and empires to protect otherwise
Unusually Aleks I fully agree with you. A Royal Commission may be the break we need to move forward and restore faith in advisers, the manufacturers and the distrubution channel owners.
The challenge for the people who sit on the commission will be asking the right questions to get the true picture and this is where previous investigations have failed. It may have been that the Senators involved are biased towards Industry Funds and been “coached” by them to ask certain questions. It may also be that Senators have used the Institutions for guidance and hence been led to ask questions that protect the grimier side of instos.
I hope that if an RC is held that remuneration and STIs of the instos (CEOs, COOs, BDMs, Product Managers, Compliance Managers, Investment Managers, Marketing people etc) are fully and clinically questioned to see what, if anything, may not support BID.
Unless of course the Royal Commission only targets the advisers, again. If ASIC had any actual worth THEY should be targeting the obvious, that being product providers with distribution is where 99.9% of the problems lie. Sure there will always be a dodgy adviser, is in EVERY single industry, but to target ONLY advisers is where the entire witch hunt has been led and manipulated by the ones who should be investigated properly.
The adviser has endured untold and unfair scrutiny and grossly unfair criticism for over a decade. Over the last few months it has escalated to a new level as a result of the compromised process surrounding the FSC submissions to the LIAWG and the subsequent Trowbridge Report.
Advisers have been the scapegoat for many of the industry’s failings simply because they are easy prey and it makes for better politics to blame the messenger. It is also less costly.
How is it that the large majority of the fee paid to the Independent Chair of the LIAWG was funded by the FSC and the final report is dangerously close to the FSC’s submission?
When the advisers are constantly attacked for perceived conflicts of interest by every group with an agenda against advisers, how is it that there are not more questions asked in relation to perceived conflicts of interest regarding the role of the FSC and the final report?
Because it’s about power,control and profit and nothing else.
As much as the idea of it galls me, on reflection, Aleks makes a compelling point.
Maybe we would, finally, get the non-financial part of our society to recognise who really are the villains in the piece.
Well said Aleks. The current regulators believe all problems are solved by filling in another form. It’s farcical that the first question on the Best Interest Duty Form is “Have you acted in the best interests of the client?” Who would ever answer “No.” So why is it there? Just another juvenile nonsensical form from juvenile nonsensical people. Why do we have to suffer them? Merv Gay