February 5, 2019
A diverse range of industry stakeholders have issued their initial responses to the recommendations contained in the final report of the Banking Royal Commission.
Most stakeholders are generally positive and welcoming of the recommendations and their implications for the sector, but given the brief period of time that has elapsed since the public release of the report earlier this week, many of the initial responses have promised a more comprehensive reply in the coming days or weeks.
In the meantime, a cross-section of initial responses includes:
Association of Financial Advisers
The AFA has written to its members focusing initially on the ten recommendations made by Commissioner Hayne within the financial advice section of the final report. The Association provides a brief analysis of each of those ten recommendations (see also: Royal Commission Financial Advice Recommendations).
Financial Planning Association
The FPA notes it is currently examining the findings of the Royal Commission, and intends on working proactively with the government to address its recommendations.
It adds that the final report highlights the need for strong consumer protection and oversight that build trust in the financial planning profession and it acknowledges that the examples of poor advice and misconduct identified by the Royal Commission are of deep concern and must be resolutely addressed.
The Royal Commission has been a catalyst for change across the financial services sector and within AMP. The outcomes of the final report provide greater certainty and will help to restore confidence and stability to Australia’s financial system.
AMP will work constructively with the government, regulators, advisers, trustees and other bodies to ensure that, as the recommendations move into definitive legislative reform, the outcomes are clear, simple and meet the best interests of customers.
NAB has released an ASX statement in which its Chair and CEO respond to the criticisms leveled at them and at NAB in Commissioner Hayne’s final report.
CBA also released a statement via the ASX, in whichit says it is working through the 76 recommendations, acknowledging the clear need for change.
NEOS Life MD, Brett Yardley, is sending a message to advisers acknowledging the last twelve months have not been easy for the life insurance advice sector, and that the Royal Commission identified a number of areas where the behaviours of some financial services businesses fell below community expectations. Yardley says this was both confronting and upsetting.
He added the release of the final report of the Royal Commission is both an important and welcome milestone: “While we may not agree with all of the recommendations, we now have a clear picture of what the operating landscape is likely to look like for our industry over the next few years.”
Yardley focused on Recommendation 2.5, which relates to life risk insurance commissions:
“Probably the most pleasing aspect of the report was the recognition that sufficient time needs to be given to observe the effects of the LIF regulations before any further changes are made to commission regulations. At NEOS, we believe that commissions are a reasonable and appropriate option for remunerating advisers for their efforts in assisting clients. We now have at least another 2-3 years to demonstrate that the LIF changes are sufficient to address any lingering concerns in this regard. This removes a key item of worry and uncertainty for our industry and provides us the opportunity to demonstrate once and for all that this model doesn’t disadvantage customers.
MetLife’s initial response includes a message from its Acting Chief Executive, Vince Watt:
“We’re pleased that the recommendations made by the Royal Commission are clearly designed to serve the interests of consumers and ensure the long-term sustainability of the financial services industry. I believe this will go some way to rebuilding public trust and driving the industry to do better.
By clarifying and formalising the obligations of all parties in the financial services system, including the role of boards, executives, advisers, trustees and regulators, there should be greater certainty for consumers. Calling out standards of behaviour will help the industry meet community expectations.”
Integrity Life CEO, Chris Powell, has said the recommendations in the Final Report of the Royal Commission will herald some positive changes for life insurance customers, and come at a time where the industry is already undergoing a shift in its models:
“There has never been a greater need to bring integrity back to the forefront of the life insurance industry – so that advisers and policyholders can believe in life insurance again – that’s the fundamental aim of Integrity Life, and so we welcome measures that help improve commercial morality across all aspects of the industry.”
Synchron Director, Don Trapnell, said his firm was particularly pleased that the Royal Commission recommendations did not include a recommendation to ban the vertical integration model, as Australians need access to advice and vertically integrated businesses play a role in making it available to consumers.
“However, the relationship between the product manufacturer and its advice network must be made very, very clear to clients,” he said.
Financial Services Council
The FSC says it welcomes the release of the Royal Commission’s Final Report, noting the financial services sector “…must be free of misaligned incentives, mismanagement and poor governance, and focused solely on protecting the savings and growing the wealth of all Australians.”
Adding that Australia’s financial services system must also be efficient and competitive, it noted, “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.
ASIC released a statement from its Chair, James Shipton, which notes the regulator will consider the report carefully, particularly its recommendations on regulatory and enforcement practices.
It says the Royal Commission’s Recommendations and the Government’s response, will inform ASIC’s priorities and strategic direction moving forward:
“The Royal Commission report identified ASIC’s enforcement culture as the focus of change needed at ASIC. This focus accords with ASIC’s change agenda, that has included the adoption of our ‘why not litigate?’ enforcement stance, the initiation of our Internal Enforcement Review and the enhancement of our governance structures.”