The nation’s banks have stated they will work towards removing or changing product based commissions and payment and will implement a mandatory, last resort compensation scheme covering financial advisers.
The banks would also implement employee registers which would track all customer and non-customer facing roles as well as financial advisers who are currently covered by an Australian Securities and Investments Commission (ASIC) register.
The changes were announced by the Australian Bankers’ Association (ABA) as part of “…comprehensive new measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks”.
ABA, Chief Executive, Steven Münchenberg said the new measures addressed consumer concerns about remuneration, dealing with poor bank employee conduct, the protection of whistleblowers and the handling of customer complaints.
“Customers expect banks to keep working hard to make sure they have the right culture, the right practices and the right behaviours in place,” Münchenberg said.
“This plan delivers immediate action to make it easier for customers to do business with banks, including when things go wrong.”
“Trust is at the centre of banking and is critical for the stability of our financial system. The strength of our banking sector got us through the global financial crisis. Since then banks have done a lot of work in improving customer satisfaction, strengthening their balance sheets, and making it easier for customers to do their banking wherever and whenever they want,” he said.
Among the range of changes released by the ABA a number of areas relate specifically to financial planning and advice services offered by banks including the independent review of product sales commissions and product based payments which the ABA stated would lead to the removal or change of commissions and payments if they led to poor customer outcomes.
Using language similar to that surrounding the Life Insurance Framework the ABA also stated “We intend to strengthen the alignment of remuneration and incentives and customer outcomes” and would work with industry regulators and seek regulatory approval and legislative reform if necessary to make the changes
The ABA also stated that while it supported a Government review into the jurisdiction and compensation levels available to the Financial Ombudsman Service (FOS), ABA members “…will evaluate the establishment of an industry wide, mandatory last resort compensation scheme covering financial advisers”.
“We support a prospective scheme being introduced where consumers of financial products who receive a FOS determination in their favour would have access to capped compensation where an adviser’s professional indemnity insurance is insufficient to meet claims,” the ABA said.
Efforts to remove individuals from the industry for poor conduct would be expanded with the ABA stating its members would “implement an industry register which would extend existing identification of rogue advisers to any bank employees, including customer facing and non-customer facing roles”.
This would work in conjunction with protections for whistleblowers with the ABA stating members would have standardised protections which included independent support, and protection against financial disadvantage.
Consumers would also be able to raise complaints more easily with each bank to take on board an independent customer advocate for retail and small business customers which would deal with matters related directly to a bank or third parties appointed by the bank.
The announcement by the ABA follows that of the Federal Government’s boost to the funding and scope of ASIC, which was preceded by calls from the Federal Opposition for a Royal Commission into the banking sector.
Many of the changes are subject to regulatory approval and with the ABA stating it would take a month to set up the governance arrangements around the implementation of the plan, the review process, public reporting, and the selection of an independent expert to oversee the implementation of the changes.
