The recommendations ask for a number of changes in different sectors, particularly in financial advice; it focuses in on ongoing fees, disclosure of lack in independence, quality of advice, conflicted remuneration and disciplining for misconduct.
Commissioner Kenneth Hayne criticised entities for their ways of remuneration, banks and their use of vertical integration, failure in regulation and lack of consequences.
Financial institutions have been asked to change, but the report also mentioned the role of regulators, saying supervision was too “narrow” and “must extend beyond financial risks to non-financial risks.”
“Culture, governance and remuneration march together. Improvements in one area will reinforce improvements in others; inaction in one area will undermine progress in others,” Mr Hayne noted.
“Making improvements in each area is the responsibility of financial services entities.”
He also slammed sales culture within institutions.
“All too often advisers have preferred their own interests against the interests over clients, despite having an obligation to pursue the best interests of their clients,” Mr Hayne said.
“Providing a service to customers was relegated to second place. Sales became all important.”
Mr Hayne’s recommendations do not include a change to the twin peaks model of financial regulation.
As he had done before, Mr Hayne accused the major banks of greed.
“First, in almost every case, the conduct in issue was driven not only by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain, whether in the form of remuneration for the individual or profit for the individual’s business,” he said.
Notably, bank shares had risen on the ASX today.
Treasurer Josh Frydenberg said the government is committing to consider each of the recommendations, with the intention to act to change the sector in interest of consumers.
“The community’s trust in the country’s financial institutions has been lost,” he said.
“This is why the banking sector must change forever.”
Over the course of its work, the commission reviewed over 10,000 submissions from the Australian public, completed 69 days of public hearings and considered thousands of documents provided by entities, regulators and consumer advocacy groups.
More to come.
We have been stiched up. IFA please investigate this:
https://www.themercury.com.au/news/national/morrison-colluded-with-banks-to-water-down-banking-royal-commission-sally-mcmanus/video/5660efd9a7ce656dffaa64759802eb78
Everyone – Watch this – we need to be informed.
Cold Day in December before I believe a word that comes out of a Union reps mouth! Go back and have a look into the Royal Commission into their behaviors/practices.
A Tasmanian rag quoting a union official. Not exactly my idea of credible.
That is what they expect from us as well, I have over 1000 clients, ranging from retirees to professional clients [ including clients that charge fees for their service ] and we have surveyed them and ALL of them have indicated that they would NOT pay a direct fee for our service and are very happy with me to collect a commission or a fee deducted from their investments each month. Our incomes have already been slashed by 30% and will reduce again by another 10% at the end of this year as a result of the Life Insurance Reforms now we aren’t even going to be allowed to look for new business due to the anti hawking rules, can’t service my clients as a result of the “switching” rules. What is the use of “Best Interest” of the client if we can’t stay in business to help any clients. Been trying to refinance an interest only loan for the past twelve months but no lender will touch us because we are in the Financial Services industry, had to let two employees that have been with me for over 15 years go due due to the increases in costs [ now get hit with the new ASIC fee ] and reduction of business income, I am working 18 hour days 6 days a week [ sometimes 7 ] NEVER had a complaint against us in 30 years of being in the industry and this is FAIR. The BANKS screwed us and now they are screwing the Mortgage Brokers next it will be the Real Estate Agents and anyone that wants to earn an honest income from hard work. If I had stayed with a bank would be receiving a six digit income, work 9 to 4, Monday to Friday and not have any costs, BUT I would only be able to advise clients on the BANK’s products and services. And we get the blame for what the BANKS have been doing for years. Our politicians are as bad as the banks, if fact many of them get jobs with them after they exit politics. Corruption is in the core of it all and its not in the honest hard working self employed Financial Advisers or Mortgage Brokers that actually care and help for their clients, so punish the ones that caused the problems in the first place, THE BANKS.
I hear you mate. time to pull the pin.
So at 3.10pm Tuesday 5th February 2019
After the news of the Royal Commission and the destruction of IFA’s and Mortgage brokers lives and livelihood, their staff and clients and after handing a right royal serve to the banks….the results according to the ASX are in:
Mortgage Agrregators
AFG down 28.98%
Mortgage Choice down 26.00%
Institutions – Banks and others
CBA up 4.95%
NAB up 4.08%
ANZ up 6.58%
Westpac up 7.29%
IOOF up 10.245%
AMP up 11.31%
Guess you showed the banks Mr Hayne. Thats was real punishment and no doubt the bank executives will be happy after your hiding you dished out. You have been completely played for a fool. Josh Frydenburg nknew this and that is why he had a grin on his face like he did.
Advisers need to unite with their clients in fury knowing that this now means we are all screwed over this level of arrogance and incompetance.
Has everyone seen the banks share prices?
Hayne is a lawyer – do lawyers give free or underpriced advice and services that are putting the client’s best interests far ahead of their own business interests at all times? Or do they balance the two, doing right by the clients but also by themselves? We are all in business. You can do the right thing by clients and put their needs first, though you can do this to benefit and grow your business at the same time. He’s an old hyprocrite
A lawyer, and the hourly rate. I worked in a law firm, add an hour here, add an hour over there. Comedy capers in reality but apparently this is the answer to the worlds problems
vast majority of the lawyers i have personally seen and met over nearly 20 years in practice, are some of the most disorganized, and inherently stupid and unethical people in the world.
no they gorge on clients like there is no tomorrow
Good call Ben L – couldn’t agree more. To the MB space…very difficult days ahead. Sadly, good or bad, once again commissions have been made out to be the root of all evil and agree in relative terms the banks who ARE the root of all this evil have had their lending businesses handed back to them. FP advisers will be better off for the belting they have already survived in the past 5+ years of FOFA et al but so many will exit on the cut off of commissions both investment/super and risk. I agree, like it or not the general public will reject the notion of looking for risk cover for a fee without the guarantee of getting the cover..it also needs to be sold by people incentivised to sell it who will no longer be there to do so. Does anyone really think LIF has been anything other than a disaster? If you do go ask the local BDM whats happened since it was introduced…premiums up, new business in the toilet, costs to them up and overall consumers worse off…and risk sales people giving up..its just too hard. So well done…Sedgewick and Trowbridge were lawyers too weren’t they?? I see a pattern..
To everyone commenting on here, I fully support voicing opinion on these forums, however as many of us are simply preaching to those that are already aware of the ramifications for our clients and business, you need to take your voices public and highlight the facts. The general public simply buy into media headlines, which often overlook facts or the bigger picture and when no one challenges the inaccuracies, public opinion is formed and politicians follow simply to keep votes. Last week I made Dante DeGori aware of the slanderous statement made by ISA about financial planners and trust and asked what the FPA was going to do about it. He was not aware of the statement, but quickly took action. If you are a member of the FPA or AFA, push them hard to go public to address misinformation or make the public aware of ramifications for our clients. An internal voice among fellow advisers will do little to challenge external actions and now more than ever is the time to speak up before its too late.
The fact that he didn’t know about it says more than his response.
Possibly true, but Ben L is just more on the ball! Ben for President! 🙂
Dante is busy tweeting about his 4P’s (passions) which are his 4 F’s (have a guess )
good luck to you all who know all this and yet remain a member of the FPA
Dante and the FPA are one of the most disappointing industry bodies I’ve ever encountered. They are to busy working out how they can stay profitable in the new education era to give a stuff about actually representing advisers interest.
It’s extremely disappointing the amount of Federal Politicians I’ve spoken to about this over the last year and they flatly state the FPA has done nothing to broach any of these issues with them.
So I think i understand what has happened:
1. The banks have acted criminally, but they are being rewarded by having their competition decimated with very little chance anyone responsible will actually go to jail for what they have done.
2. The regulators have not done their job well and didn’t notice a problem that cost Australian consumers more than $1b are being rewarded by the Government giving them another $130m to increase the size of their workforce.
3. A financial adviser who was accused of advising his clients to switch insurance which ASIC believe was not in the best interest of the client has been banned for 5 years.
Something doesn’t look right, but I can’t quite put my finger on it…..
You are missing the Benny Hill Music, link for convenience.
https://youtu.be/MK6TXMsvgQg
Hahaha! Too funny, thanks, I needed a laugh and stroll down memory lane. Can just see that [b]clueless Hayne[/b] trotting around to this music.
Kenneth Hayne much like all lawyers, I am certain knows the law. But this is where the problem starts.
Like most lawyers, believing that they are holier than thou, they have no understanding of economics, no understanding of how a business works and certainly no understanding of how supply chain economics works. Believing that there are no such things as a relationship type business, only a transactional one. This is not how the mortgage of financial planning industry works.
For mortgage brokers, whose lives and businesses have been destroyed overnight, this will mean that the only winners will be the ANZ, Westpac, CBA and NAB. The despicable behaviour of these major banks has been addressed with nothing more than a wet lettuce leaf.
The destruction of a mortgage broker will infer that consumers will not in the majority of cases be able to afford a fee of anywhere from $2000+ dollars for mortgage advice that needs to be in their best interest.
This will then infer that smaller lenders cannot use the services of a broker channel and will either need to employ staff and mobile lenders in order to compete, but their margins will be squeezed to the point of being unviable.
In short, the entire lending world has been handed to the big 4 banks with the result being what consumers should NOT want and be most fearful as banks will price their product purely for profit with next to no competition.
This is a disaster for the homeowner as well as the small business sector. They will have to deal with a product that may not be suitable, it may well be priced higher than others and so ins short, they will be at the mercy of these swine such are the major banks.
As for insurance commissions for risk, the same scenario will apply.
There has been no discussion of unfair terms in an insurance contract, no addressing of penalties for wrong doers as a result of poor advice in this space. No addressing best interest for a consumer as the RC recommends consumers pay for insurance advice from their own pocket ONLY.
So, with wages growth being anaemic in Australia for 2 decades and with Australians at high levels of debt and with rising cost of living, can an Aussie family afford to pay say $3000+ dollars for insurance advice on top of a premium for the product itself. Very few could.
The Australian Council of Social Services reported in December 2018 that currently some 13.3% of Australians are living below the poverty line. With high rents, job insecurity and 1 in 2 people suffering from a mental health condition as reported by Beyond Blue, what are the options if anything goes wrong? Centrelink? What of the cost to the taxpayer in this scenario?
And why are we not addressing the 33% capital commission a lawyer charges for a litigation matter when an insurer using an unfair contract refuses to pay a TPD claim.
Examples of such behaviour exist on a grand scale and yet nothing in terms of substance from the RC.
In short, LIF was supposed to address this we were told, it hasn’t, as reducing commissions has had the effect of increasing an under-insurance problem, reducing sales of life insurance products, having the flow on effect of a reduction in Stamp Duty to state governments and producing poor outcomes for all.
There is no understanding of what a “commission payment” is. The cost of doing business. Simple.
Supply chains are important as is competition. But this needs the understanding of those in charge to also understand economics, business, supply chain economics, competition law and common sense. Lawyers I am sure are great at LAW. As for all other areas mentioned, they are sadly found lacking and for the intended audience such as the consumer, they will be the biggest losers from this. They will cheer today but will realise some very horrible outcomes. Fast!
Reduced competition, an oligopoly created as a result of arrogance in the face of incompetence, driven by wilful ignorance and blinding levels of stupidity is what the Royal Commission has brought to us as IFA’s, mortgage brokers, our staff, our clients and the economy at large.
God help Australia with this nonsense.
well said – too much common sense.
Good stuff Al. Well said!
Risk comms dealt with under LIF – still in transition and thus protected for some years. Only mention of trail comms was investment grandfathered ones. Risk trails are safe for now as are upfronts (what’s left of them under LIF anyway. Remember people, these are only the findings of an inquiry by an old out of touch lawyer. It doesn’t mean anyone will take them seriously when the adults come up for air and see this mess. Politicians have to pass these into law. People are acting as if that’s already been done. Most of this won’t happen. Think about it.
HI Josh, Please don’t forget to allow us to fund the overseeing regulator and the compensation fund.Just give us another levy. I am sure the government can’t afford to….although monitoring will be easier now , Shipo can slid down and have a coffee with Big4 and ISA and get a thumbs up that alls ok , SINCE EVERYONE ELSE WILL BE GONE.
Comrade Hayne has spoken. “Down with the free market and competition. The people must be controlled”
What happens when financial advice businesses collapse en masse and the market flocks to the banks, doing nothing but bolstering their oligopoly.
How could this Royal Commision fiasco possibly still be viewed as a punishment for the banks? Clearly they will experience a short term drop, but long term this is the greatest gift Hayne could have given them.
I’m not claiming to be the brightest person, and even I can see how this will play out. I’m sure Hayne isn’t an idiot either, so it would be unsurprising if this was their motive from the get go.
in an oligopoly you don’t compete on price. you jam the consumer. the consumer has no idea what’s coming to them.
i thought this was about achieving a better outcome for the consumer by removing all competition ha ha ha seriously these people are on some serious drugs
can anyone tell me who wrote the terms of reference for hayne ? therein lies your answer
The fact so many of you are upset, shows this is a good move.
If you can explain how shafting small brokers and pushing consumers to the banks (who were the cause of all this in the first place) is going to do anything but screw over consumers, I’d love to hear your explanation.
Hint: I won’t get an explanation because there is no reasonable one.
Here’s one . Many mortgage brokers have been consistently manipulating income and expenses to get dodgy loans thru . I went via Nab direct and they said no due to income and assett levels , went to a broker and magically was approved guess who they used NAB !!!! They need to get rid f the dodgy one and have an opt in every year . What do they do for their trail for 20 years ?/ Nothing !!!!!
So, you are unhappy that you ended up getting a loan that you applied for and I assume felt that you could service? :roll::roll:
You just admitted that you participated in fraud yourself. The Broker would not have dodged up your figures – if they did you must have participated and provided additional dodgy documents.
Typically what happens is the Bank staff are not that motivated and it is just a job. It is a bit similar to getting a good lawyer or a bad one – the good lawyer will find legal ways get you out of trouble – the unmotivated one will not. Your choice.
Anonymous – I am calling you out on this. If you indeed did lodge an application with NAB which was rejected, NAB would have been well aware of this fact when the application was lodged a second time with NAB. Possibly your situation either changed significantly on the second application (which you would be aware of), you applied for a lot less, you lied on your second application, or you lied here.
Any comments?
There is, of course, the good chance that you had no idea what you were doing when you went to NAB directly and you mucked up your own application. And then the broker got it right and you got your loan. Not sure why you would then begrudge the broker (who does not create any extra costs to you) being paid by the bank for the business he brought to the bank.
Of course, if you did not muck up the application, then i am not sure why you think it is the broker who was dodgy. You signed your application.
THE law states that a person who signs a contractual document does by his signature assent to the contents of the document, and if the contents turn out not to be to his liking he has no one to blame but himself.
[b]Caveat Subscriptor….let the signer beware.[/b]
he jammed the lawyers too. they can’t do settlement’s out of super at 40% that will be designated as a financial service
but the most jammed are the mortgage brokers. they gonna die. i’m gonna buy some bank shares as we go back to the old days of the big 4.
Good move indeed – have you seen the CBA share price? Up 4.78% already. You can’t deny that. Good move indeed. Well done. Wonderful. That stuck it to them – the Banks no longer have to pay Brokers or Financial Planner who make them compete – they can get people back into the branch where they belong. Good job. Well thought through. Biggest victory for the Banks I can remember and unlikely to be topped in the future. Do you work for ASIC?
The fact that you even posted makes us think you’re brain dead….
CBA share price up 5.1% now – good move indeed. Good move indeed. Thanks Anon – good move indeed.
Anon, check out the share price of AMP – good move mate, good move.
i knew this would happened so i bet big on AMP, and now i am gonna enjoy the spoils.
Anonymous, I think it’s time the industry as a whole stopped blaming the banks for the mess, and we all took time to reflect on our own businesses. Having worked in both banks and private firms, some of the worst advice and processes I have seen are in so called “independant” firms, but they don’t get air time when there are 4 or 5 advisers in a practice compared with 300+ in a bank. Am I saying every independant firm is this way? No, but at the same time there are a lot of good advisers that work on banks too
I have worked in both banks and private firms as well, and have seen far worse processes in the banks than the smaller firms, which is at odds with your assertion.
I think it is the perfect time to be blaming the banks, seeing as it was (overwhelmingly) their conduct which led to this mess, and it is them who will ultimately benefit from it. Which is disgusting considering how this farcical display is being presented as disciplinary action.
I’ve seen shocking advice from both bank employed planners and small licensees with none of that comparing to general advice from industry funds and unlicensed “wealth coaches”. Rather than pointing figures about where the bad advice is coming from how about the regulators actually punish poor advice, establish safety nets that are equitable to all clients (in other words ban intra fund advice that involves fund switching and insurance changes, direct sales and general advice) and punish those that let bad advice happen (ie) the senior managers at large entities including the banks that effectively punish their employed advisers from doing the right thing.
I also worked for the Banks where I coined the term “You are the author of your own dispensibility”, namely an acknowledgement that the more business you wrote, the more the bank was incentivized to get you to leave….That way the relationship between you and the client didnt get too strong and you left all your commissions and trails behind.
Banking royal commission winners…..
The banks
Losers everyone else.
Way to decimate the banks competition! Bye bye all independent advice for insurance or mortgages.
Kenneth (Goldman Sachs) Hayne can I come swim in your bank funded diamond tiled gold edged swimming pool
Just amazing that in the stroke of a pen now the circus has finished Hayne comes along and says that the end of your earnings and the Government says ok. No consideration is given to small businesses and the impact on them and their staff as well as clients, this could be the nail in the coffin for so many good advisors.
This comes from the Legal Profession who should also have a royal commission into their behaviour and practices.
Too many advisers, for too many years, have taken too many fees, without providing too much in the way of service.
This may not be you, but our failure as a group to clean up our own backyards has led to this outcome.
I think you are speaking about a tiny minority. Most of the street already have a clean backyard, but that big one neighbour didn’t (Banks and big instos) which made the rest of the street look bad.
I find it odd that people would continue to consent to pay for something to which they perceive no value. It’s really no one else’s fault if you keep your Foxtel subscription in place and choose not to utilise it, much the same way it is with any fee service.
These fees paid to advisers have been able to be terminated at client request for well over a decade. The clients receive annual statements (If not more regularly) advising all product cost including fees and clients since 2013 have received FDS every two years from the advisers advising exactly what they are paying.
I would say too many people are lazy and as usual wish to blame others for their own failings. Sadly all the clients happy with the service they receive from their advisers are going to be negatively impacted from these outcomes.
Come back O’Dwyer ????? she was less dangerous???
Good night Mortgage Brokers, your business has been destroyed overnight. You have 12months left and 36 months of your lucky.
You sole hope is if you industry body or the likes of AFG rally a protest, pitch it well and have this canned. Otherwise your finished. There is no chance a client will pay you what you need to exist let alone what you need to cover your time.
Watch AFG and Mortgage Choice shares fall off a steep cliff Tuesday. They would have to plunge at least 50% I’m guessing.
Banks will soar.
Down 29% (AFG) and 26% (MOC) at the moment.
they will be gone. it won’t matter though MOC is part owned by the CBA (20%) as are most other aggregators, they will just gobble them up. AFG will go bust as will all other mortgage aggregators who are not already owned by one of the big 4
brokers have no idea what they are in for. the most damning thing they haven’t even got around to is that they will be regulated under the same rules as financial planners i.e have to give a comprehensive statement of advice for each loan. top up, product change from variable to fixed etc etc
do a loan amortization schedule so the borrower is on track to pay their loan off in 30 years or else the broker gets sued anytime.
not only have the banks reduced the income of brokers they have passed on their liability to the broker.
The Banks and Insurance Companies are the winners here and the financial advisers and mortgage brokers the losers. God help our Industry !
So the bank executives aren’t held accountable? Seriously? And advisers and mortgage brokers ARE!!
Who benefits from this? The Banks. Oink Oink. Snouts in troughs.
Why are we not surprised. And for all the advisers and mortgage brokers who borrowed to buy a business to build on to provide for their family the ongoing grandfathered income will be gone in 2 years after the govt allowed it to continue in 2014. What now? Opt-In every year for FFS upfront income. Only the very wealthy will afford advice and ordinary folk cannot pay all upfront fees.
Massive redundancies of employers and business owners and thousands of redundant women staff.
Yep and FASEA and that exam on top of this,
and the Winner is? The Banks.
Not sure if I missed something, just curious. Why redundant women staff?
The Banks brought this upon us and now the only Advisers who actually look after clients will be wiped out! How is that a good is that for Australians? See UFAA.asn.au
The Banks were found to be responsible for the majotiy of WRONGDOING against consumers. Yet it will be the non-bank Financial Planners and Mortagage Brokers who will pay for the Banks’ wrongs with their livlihoods. The banks have been “unscathed” and the Government will wipe out the only competition and alternative to the Banks, the non-bank Advisers
Was anything learnt from UK? Looks like carnage.. got to feel for every adviser who has just lost his business. Makes me sick
Not much that people in the industry were not aware of -unfortunately ASIC IS JUST AS GUILTY as the major players for either not understanding the industry or being incompetent or both. Will be interesting if persons mentioned in the RC for wrong doing will be removed from the industry although this is not what ASIC has been saying rather that some of the matters are too old.
This Is a bit like saying they committed murder a long time ago but has been good since so we will not do anything.
Everyone but brokers: [i]Phew[/i].
I’m guessing the banks believe it was all worth it:
Haynes recommendations:
“Borrowers rather than lenders should pay the mortgage broker for their services.
Lenders would be banned from paying trail commissions to mortgage brokers for new loans.”
Bye bye life insurance companies and risk advisers. Thanks for your recommendations Hayne, you really have no idea if you think that advisers will advise clients to take out insurance and not receive any income for doing all of the work. If clients are charged an hourly rate for the advisers to put insurance in place, they simply won’t pay for it, or more simply, won’t be able to afford to pay for it – why would advisers take the risk (no pun intended) of writing insurance and not get remunerated for it?……. Who exactly does this benefit?
Again a case of the baby thrown out with the bath water.
A short sighted, ill conceived and poorly considered recommendation, it will,( as I predicted) all end in tears
This is the one entry that has me quite worried about the industry.
There is no evidence at all that there is benefit in removing commissions further. I mean going from 88% -> 77% on upfront has done absolutely NOTHING for consumers and insurers are just pocketing extra cash.
Does anyone really think they will see an opportunity like “0%!” and not take advantage again?
100%….just like the UK, in years to come they will regret the extreme measures taken, both parties will jump on all recommendations as they are vote bait.
The Industry funds stupid !!! cant you see that , ???
Well that solved the 2 year responsibility period… 🙁