The royal commission report into the financial service industry was scathing of banks and financial institutions.
Commissioner Kenneth Hayne slammed the banks for being driven by greed and also accused the regulators of being too soft while dealing with these institutions when they were caught breaking the law.
The report made 76 recommendations to clean up the sector and the government’s response supports all of them in part or whole.
Treasurer Josh Frydenberg yesterday said: “the banking sector must change and change forever”.
Here are some of the most important recommendations of the report and what it means for retirees.
Banking
- Justice Hayne has referred a long list of companies (including ANZ, NAB, CommInsure, AMP and Suncorp) for possible criminal or civil action.
- Require mortgage brokers to act in the best interests of the intending borrower, not the bank providing the loan.
- Borrowers rather than lenders should pay the mortgage broker for their services.
Superannuation
- A ban on advice fees that are deducted from MySuper accounts
- Advice fees for accounts other than MySuper accounts to be prohibited in most cases
- Heavy-handed selling of superannuation to be abolished.
Financial advice
- The creation of a new disciplinary framework for financial advisers
- All financial advisers to be registered
- The annulment of grandfathered provisions of conflicted remuneration
- The current cap on commissions for life-risk insurance should be reduced to zero
- Banking licence holders to be required to report ‘serious compliance concerns’ about financial advisers to ASIC on a quarterly basis.
Insurance
- Ban on heavy-handed selling of insurance products
- Funeral expense insurance to be treated as a financial product so that it receives proper oversight
- A cap on commissions paid to car dealers for add-on insurance products
- Handling and settlement of insurance claims to be defined as a financial service so that it receives more oversight.
Regulators
- ASIC and APRA to be overseen by a new independent authority (a watchdog for the watchdogs)
- ASIC to overhaul its approach to enforcement with a focus on court action rather than infringement notices and enforceable undertakings.
What did you think of the royal commission’s findings? Did it go far enough? What action would you have liked to see?
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