Banking Royal Commission – Insurance, Advice Recommendations


The Government has released for consultation draft legislation to implement a raft of recommendations from the Banking Royal Commission.

A statement from Treasurer, Josh Frydenberg, details a series of draft legislation to implement 22 recommendations.

The recommendations impacting insurance, financial advice, banking and superannuation include:


  • Recommendation 4.1 to prohibit the hawking of insurance products
  • Recommendation 4.3 to establish an industry-wide deferred sales model for the sale of add-on insurance products
  • Recommendations 4.4 to provide ASIC with the power to impose a cap on commissions for add-on insurance products and insurance-like products
  • Recommendation 4.5 to implement a duty to take reasonable care not to make a misrepresentation to an insurer for consumer insurance contracts
  • Recommendation 4.6 to add an extra condition for life insurers to show they would not have entered into a contract on any terms if they had known about the unintentional misrepresentation or non-disclosure
  • Additional commitment in response to recommendation 4.2 to restrict use of the term ‘Insurer’ and ‘Insurance’ if the product or service is not insurance, in circumstances where it is likely that the product or service could mistakenly be believed to be insurance

Financial advice

  • Recommendation 2.1 to enhance the existing ongoing fee arrangement provisions
  • Recommendation 2.2 to require entities who are authorised to provide personal advice to a retail client to disclose in writing to the client where they are not independent and why that is so


  • Recommendation 3.1 to prohibit superannuation trustees from having duties other than those arising from or in the course of the performance of their duties as a trustee of a superannuation fund
  • Recommendation 3.2 to remove a superannuation trustee’s capacity to charge advice fees from MySuper products
  • Recommendation 3.3 to remove the capacity of a superannuation trustee to charge advice fees to a member unless certain conditions are satisfied, including the new requirements outlined in relation to Recommendation 2.1 for ongoing fee arrangements
  • Recommendation 3.4 to prohibit the hawking of superannuation products


  • Recommendation 1.15 to strengthen the existing code of conduct framework in the financial services sector to enable certain provisions of financial services industry codes to be made ‘enforceable code provisions’ which, if breached, may attract civil penalties, and to create a new mandatory code of conduct framework
The …measures will also strengthen and enhance the regulatory regimes for ASIC and APRA …

The statement from the Treasurer noted that the Government’s measures will also strengthen and enhance the regulatory regimes for ASIC and APRA by implementing:

  • Recommendation 2.7 to establish a compulsory scheme for checking references for prospective financial advisers
  • Recommendations 2.8 and 7.2 to strengthen breach reporting requirements for Australian financial services licensees
  • Recommendation 2.9 to require Australian financial services licensees to investigate misconduct by financial advisers and appropriately remediate clients affected by the misconduct

The exposure draft materials are available on the Treasury website here.

FPA cautious on impact on financial planners

The Financial Planning Association of Australia has cautioned that the Government’s draft legislation [as outlined above] “will have significant and real impact for financial planners”.

FPA’s CEO Dante De Gori.

The association says in a statement that it has been in close consultation with the Minister, Treasury and other associations to ensure the legislation reflects the best interests of FPA members and the financial planning profession.

“The draft legislation closely aligns to the recommendations outlined in the Royal Commission, but if implemented, the FPA warns it will further increase the time and the administration burden on financial planners helping their clients,” the statement says.

FPA Chief Executive Officer Dante De Gori says: “The FPA continues to advocate strongly on behalf of members. However, the most important thing for financial planners is to understand the impact this will have on their business and to start planning how they can efficiently and effectively operate their business in this new legislative environment,” he says.

“This legislation will require business practice changes, administration changes, disclosure changes and financial planners need to be thinking about this sooner rather than later.”

One specific proposed Recommendation in the draft legislation that the FPA continues to challenge relates to the requirement for financial advisers to renew client fee arrangements every 12 months, rather than the current two-year period.

“The FPA agrees financial advisers should be required to periodically review and renew ongoing fee arrangements, document them and seek the consent of their clients for any fees to be charged,” De Gori says.

“However, we believe requiring this to be conducted annually without any modification to the laws around when an ongoing fee arrangement can be renewed rather than reset, adds considerable time and cost pressures on financial planning practices. It is not practical and will be too much of an administrative burden for many practices,” he says.