Unveiling the extent of greed, abused trust (even predation) in the banking and financial sector has disturbed all Australians. It’s sullied all financial service providers, whether deserved or not. Let’s hope consequent changes can significantly shift that culture to one where ‘client first’ rules.
In treading this path over the last five years, the UK experience isn’t very encouraging. Shifting the banking sector culture is a huge task that begins with modeling top-down behaviour and sensibly remunerating for it. In the nine years since we began our business, our revenue comes only from our clients – this makes it clear we work only for them. Even so, our difference may be hard to discern in the Royal Commission mud bath.
In the court of public opinion we can only keep working the way we have. So, you may be interested in how we are affected by the Royal Commission into Banking, Superannuation and Financial Services. The answer is there is no direct effect on our services by the Commission’s recommendations because for many years we’ve instinctively applied the principles it recently recommended.
The Royal Commission was resisted many, many times. Eventually the banks themselves called for it, encouraging a constrained process to minimise consequent damage. Despite verbal castigation of banks and regulators during the hearings, the final recommendation is to trust those same under-performing regulators with any prosecution decisions. The market breathed a huge sigh of relief and bank shares rose strongly… shareholders are happy, though the public may be less convinced.
The Royal Commission recommendations that directly affect advisory work are as follows:
- Ongoing fee arrangements must be renewed annually by the client with payment authorised by the client – we’ve worked this way for many years
- If an adviser is not independent, impartial and unbiased, they must explain why they are not in simple, concise language – we’ve been independent in the legal sense for many years.
- Grandfathering of old investment fund trailing commissions is to stop on January 1st 2021 – we don’t retain these and credit them to client cash accounts if they arise.
- Life insurance commissions are expected to reduce to zero over the next three to five years – we’ve provided commission-free life insurance for many years.
- A new disciplinary system will be established for financial advisers. Licensees should diligently report misconduct by their advisers and conscientiously reference check and share information between Licensees when terminating advisers. Yes please.
- A review of measures to improve the quality of advice is to be undertaken by government in consultation with ASIC in three years. Sounds good to us, if it avoids pointless bureaucracy.
Other recommendations from the Royal Commission all sound sensibly centred around delivery of trust but don’t directly affect our client work. If they improve the investing and strategic financial landscape, they’re obviously most welcome. Some that deserve special mention are:
- More realistic bank executive remuneration. Is any individual’s employment really worth many millions per year? Capitalism with a social conscience seems overdue.
- New independent oversight of the effectiveness of regulators (ASIC, APRA and others). We all understand the benefit of holding to account. Will Bank/AMP culture really change?
Our ‘back room’ motto has always been to “give the advice you’d like to receive”. Essentially we adopt a financial engineering approach – understand each client’s circumstances and goals, design an elegant solution, then manage its outcome. People happily pay us to do this, often referring their friends for similarly successful solutions.
Perhaps you know someone who would benefit from the progressive way we offer award-winning independent advice? If so, they can call us 08 7120 9300.