Twelve months after it began, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry concluded earlier this month with the handing down of the final report.
It is an area that many don’t understand, and that far more are not particularly interested in, so here are the highlights of what the recommendations could mean for you.
The recommendations are mainly concerned with actions and behaviour at the fringes of what would be seen as unethical and inappropriate.
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For the many of us who receive our financial services from the vast majority of service providers which already do the right thing, we may not see any noticeable change in our personal circumstances following the legislation of any recommendations.
But overall, we should see a general improvement in behaviour from those in the banking industry.
We need to wait to see who is elected to Government later in the year, and for the recommendations to be debated and passed as law, before we know what the final impacts of the Royal Commission will be.
Mortgage Brokers: Currently 6 in every 10 new home loans in Australia are written through a broker. If the recommendations for a consumer pays model are adopted, then you would be paying for this service in the future. However, both sides of Government have indicated apprehension to implement these recommendations due to the likely unintended consequences of reducing competition and increasing home loan costs for borrowers.
Removal of point-of-sale exemptions: Retailers offering finance (such as car dealers and those offering buy now pay later finance) have previously been exempt from the National Consumer Credit Protection Act. By applying the act to those retailers, it will mean staff are required to do more detailed checks, resulting in a more detailed process to obtain finance at the point of sale.
Basic account fees: Probably the recommendation that will impact the largest numbers of people, but for a relatively small saving, is the recommendations to not charge dishonour fees on basic accounts and the banks not being able to provide overdrafts on these accounts without your consent. This will include the ability to overdraw your bank account when making a purchase. In the future these will only be available to those who have formally opted in.
Most of the other recommendations relating to banking are around the fringes, relating to farms and agricultural loans
Financial Advice Recommendations
Annual Renewals: The Report calls for all financial planning clients to go into an ‘opt in’ process every 12 months – agreeing to the fee schedule and services that will be received. If you have a financial planner expect to hear from them at least every 12 months.
When adopted, these recommendations will restrict the type and amount of fees that can be charged to your superannuation account. This is a win for anyone with superannuation and should result in a higher amount available at retirement than would have been available under current fee structures.
The recommendations here are generally for regulating better service and behaviour from those selling insurance products, and how claims are handled. This should result in better overall service to those seeking and claiming on insurance. How noticeable this improvement will be for the average insurance policy holder remains to be seen as most of the behaviour being addressed was already at the more questionable edges of the spectrum.
The regulators of the industry have also been asked to improve their oversight, and better respond to issues.
My advice on the back of all of this, is to make sure you understand exactly what service or product you are paying for and receiving or ask as many questions as you need to until you do.
Look at your statements – be they superannuation statements or bank statements – and question any fees you are not sure of. And if you are having trouble get assistance from someone who can help.
Our opinion is that shining a light on any poor conduct is the best antiseptic. Overall, we expect to see finance related industries strengthen and improve as a result of the Royal Commission; giving better outcomes to more consumers of these services in Australia.
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