After 68 days of hearings, 130 witnesses and more than 10,000 public submissions, the Hayne royal commission has left no stone unturned. It has uncovered shocking and unethical practices by many financial institutions and advice providers within the financial services industry.
We are pleased to report that none of these recommendations will impact the way we provide our financial planning services to you.
The final report includes 76 wide-ranging recommendations, and all will be adopted by current and future Governments.
In reviewing the recommendations, particularly focusing on those that will directly impact the provision of financial advice and products, the following are worthy of highlight:
The regulator, ASIC, was scrutinised for failing to prosecute wrongdoers, instead opting for a slap on the wrist. While the findings of the royal commission were shocking, it concluded that fundamentally the current laws in place are sufficient, they simply haven’t been enforced. ASIC will be given greater resources with an expectation that more swift action will be taken against those who break the law.
Section 923A of the Corporations Act details how a financial services business must comply to call themselves ‘independent, impartial and/or unbiased’. Those who cannot satisfy the definition of independent will now need to explain what area of their business is ‘conflicted’. We absolutely applaud this step. Being ‘conflicted’ does not mean a financial planner does not act in their client’s best interests, but the client has a right to know why and how the adviser is ‘conflicted’ and how the conflict is managed.
No recommendations were made regarding vertical integration (fin services providers recommending investment products they also own), but our hunch is that Hayne believes this would adequately deal with the issue. We don’t agree.
Yes, commissions on investment products were banned from July 2014, but grandfathering rules still apply for investment product commissions established prior. Not anymore!
Perhaps more notably, recommendations have been made to abolish commissions on personal insurance and mortgage broking products during a two to three-year phase-out period. In October 2017 Hewison introduced a fee for service insurance broking given our objection to the commission structure of the industry. Many said it wasn’t a sustainable business model, but we are proving them wrong.
Abolishing commissions paid to mortgage brokers is a complex matter. Many believe that this change will kill the industry and play right back into the hands of the big banks because, without an industry of brokers, consumers will go directly to the banks without considering other lending providers.
Under the current FoFA regime, every two years we are required to obtain an ‘opt-in’ statement from our clients agreeing to continue paying for the agreed service provided. This will now need to be signed every 12 months.
Lastly, we will leave you with a less publicised recommendation regarding
We believe that this goes to the very heart of ‘why we are different’. Hewison Private Wealth has a ‘culture of compliance’. Understandably it begins with acting in our clients’ best interests. It also requires all staff to understand what our compliance obligations are, including disclosure of any errors made so that satisfactory solutions are implemented, and we learn from our mistakes.
This provides the foundation for a great culture and robust corporate governance.
While some very honest and ethical professionals will be impacted by the Hayne Royal Commission recommendations, the good ones will adapt and prosper. Fundamentally we support the recommendations as a means to create lasting positive change in our industry.
Thank you very much for your support and we assure you, we will continue to work tirelessly in your best interests.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.au
Please note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.
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At Hewison we own and operate our own Australian Financial Services License (227185). This provides us the freedom to personally tailor our plans and advice to meet your individual financial needs.