The Future of Financial Advice (FOFA) bans on conflicted remuneration need to be expanded to include the sale and service associated with all financial products and should encompass the remuneration of bank executives, according to the Finance Sector Union (FSU).
In a detailed submission to the Senate Economics Committee inquiry into Consumer Protection in the Banking, Insurance and Financial Sector, the union has pointed to the major banks having talked the talk on reforming their practices without actually having walked the walked.
It said that when confronted with the discovery of wrongdoing within their organisations, the banks had resorted to a “playbook” of trotting out standard lines about acknowledging concerns and fingering a few rogue employees before activating lobbyists to limit regulatory enquiries.
Referencing this, the union submission has directly countered the self-regulatory approach being argued by both the Financial Services Council (FSC) and the Australian Banker’s Association, arguing that “the sector is not capable of change through self-regulation”.
“Workers have seen their industries transform from one that provided the money, financial security and systems that facilitated the operation of the economy to one where the corporations that they serve now dominate the economy,” the submission said. “Competitive forces and the demands of the investor will continue to prevent a fundamental realignment of the industry without legislative force.”
The FSU rated as a high priority extending the FOFA ban on conflicted to virtually all remuneration in the financial services sector, and then argued strongly for the removal of the “balanced scorecard” exemptions.
It said all conflicted remuneration should be banned from the industry, including from executive remuneration systems and that a duty of care should be imposed “that requires all financial intermediaries, their employees and agents to only provide appropriate products and/or services taking the customers’ circumstances into account”.
“Each institution should be required to ensure all employees and agents who provide advice, products or services to a customer are properly trained and accredited to provide the appropriate products or services. The same obligation should apply to the managers of the employees in question,” it said.