The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was presented to the Federal Government of Friday 1 February 2019 and released to the public 3 days later on Monday 4 February.
The 76 recommendations covered the banking sector, provision of financial advice, superannuation, insurance, culture, governance, remuneration, the regulators and other important steps.
In relation to financial advice, the Royal Commission’s recommendations relate to;
Ongoing fee arrangements
- Recommendation 2.1 Annual renewal and payment: The Corporations Law to specify new annual requirements for ongoing fee arrangements.
Lack of independence
- Recommendation 2.2 Disclosure of lack of independence: Clients to be provided with fuller written explanations as to why an adviser is not independent, impartial and unbiased.
Quality of advice
- Recommendation 2.3 Review of measures to improve the quality of advice: A government review to be conducted in 3 years’ time.
- Recommendation 2.4 Grandfathered commissions: Grandfathering provisions to repealed asap.
- Recommendation 2.5 Life insurance commissions: The RC recommendation is that ASIC should consider reducing the cap on commissions to zero.
- Recommendation 2.6 General insurance and consumer credit insurance commissions: Further recommendations for bans on conflicted remuneration to be banned.
Professional discipline of financial advisers
- Recommendation 2.7 Reference checking and information sharing: New profiling will become mandatory for AFSL holders.
- Recommendation 2.8 Reporting compliance concerns: AFSL holders to report “serious compliance concerns” about individual advisers to ASIC.
- Recommendation 2.9 Misconduct by financial advisers: AFSL holders to advise clients of adviser misconduct.
- Recommendation 2.10 A new disciplinary system: The establishment of a new disciplinary system for financial advisers.
In terms of;
- mortgage brokers to be subject to the same legal requirements as financial planners – as big a burden on the mortgage broking industry
- hawking of superannuation products will be prohibited.
- people will not be able to be issued with a second or more default superannuation accounts.
- ASIC and APRA to work more closely together.
- changes to strategies for selling insurance products.
Culture, governance and remuneration
- amendments to APRA prudential standards and guidance notes.
- the current arrangements for a prudential regulator (APRA) and licensing regulator (ASIC) is to continue with more interaction between the 2, and a new oversight authority
Some of the recommendations will require new legislation. Some recommendations recommend changes to industry codes. Additionally, no “do by” dates have been recommended by the Royal Commission Report.