The long awaited Royal Commission enquiry into bank conduct has now ended, and results were delivered to Parliament on Feb 4th 2019.
Big shake ups and changes are on the way, and the consumer will hopefully be the end beneficiary of this year long enquiry, that sees 76 recommendations in total delivered. So what are these recommendations and should they be implemented?
Some key points and an overview:
• A total overhaul and disruption of several business models in Australia. Industries include Banking, Finance, Superannuation, and Mortgage Brokerage
• Several breaches by banks were referred to ASIC, resulting in potential criminal charges
• The Sales culture of the financial services sector to be overhauled, after findings of behaviours with conflict of interests.
Looking further into the financial services sector and their conflict of interest findings refers to the behaviour and culture between Mortgage Brokers and Banks. Currently, brokers receive commissions for securing the loans to borrowers, whilst also being entitled to trailing commissions over the term of the loan. Brokers in theory are to always act in the borrower’s best interest, but given that around half of Australia’s home loan borrowers go through a broker and long term commissions are at stake, it is a given that this promotes a culture that does not serve to the customer, but rather the financial relationship between broker and bank. The report suggests that no commissions are paid from the bank to the broker, but rather from the customer to the broker, which would discourage brokers favouring certain banks.
A brief overview of the report recommends that a law is passed that requires brokers to always act in the best interest for the customer.
A key recommended change in the report includes forcing customers to hold down only one superannuation account, rather than multiple default accounts handed to them by employers.
Changes to drought affected farmers will also take place, with more pressure placed on banks to help our farmers with their banking processes.
Insurance companies will no longer be able to use against you, your genuinely forgotten or seemingly insignificant conditions when signing up, and hawker insurance phone calls will also be a thing of the past.
Lastly, if a customer is wronged by any financial institutions and the courts find in favour of the customer, a scheme will be put in place by a financial industry fund that will be able to pay out should the institution go bankrupt, providing financial protection to the customer.
All in all, resounding good news for Australian customers. We’d love to hear about your thoughts and comments on the royal commission.