The financial services industry should brace itself for 2019 being a year of further significant change.
Why? Because if the Government is not forced to the polls earlier, the next Federal Election will be held in either April or May and because the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will be a major election issue.
It is now certain that the Royal Commission will remain on the front pages of newspapers right up until early December and probably beyond, with the Commission having allocated the two weeks between 19 November and 30 November for a seventh round of public hearings which will “focus on policy questions arising from the first six rounds”.
Why is this important? Because it means that the Royal Commissioner, Kenneth Hayne, will deliver a further round of recommendations flowing from those hearings dealing with policy issues in late February or early March, at a time when the major political parties will be in full election campaign mode.
Make no mistake, the nature of politics resulting from the August events which saw the Liberal Party oust Malcolm Turnbull as Prime Minister and install Scott Morrison are such that the major political parties will enter campaign mode well before the Christmas break and that they will escalate those efforts the moment the Parliament resumes in March.
It is in these circumstances that the Royal Commission’s deliberations must be regarded as handy political ammunition which the parties will seek to use to further their election chances.
Thus, if the earlier hearings of the Royal Commission are to be taken as a guide, the industry should be bracing itself for recommendations which touch upon the rules governing vertical integration within major financial institutions, the shape of Australian Financial Services Licenses (AFSLs) and the governance arrangements around superannuation funds.
Importantly, while counsel assisting the Royal Commission, Michael Hodge QC, has focused on the legality of some conduct of major entities such as AMP Limited, the Commonwealth Bank and MLC, his post-hearing submissions have also pointed to policy issues which may need to be addressed with respect to the activities of industry funds, such as the funding of political advertising (AustralianSuper) and corporate hospitality (HostPlus).
The Royal Commission is this week dealing with the insurance industry and it is likely that policy issues will also arise not only around the relationship between insurers and financial planners but also around the far greater amounts of money involved in the dealings between superannuation funds and group insurers.
It is in the nature of Royal Commissions that Governments are not obligated to act on all of their recommendations, but the level of heat which has been generated by the matters aired at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is such that the industry faces changes no matter which side wins the next Federal poll.
It is in such an environment that financial planners and others are likely to find little sympathy on either side of politics when they seek to complain about the challenges presented by the Financial Adviser Standards and Ethics Authority (FASEA) regime or the Life Insurance Framework (LIF). Politicians fighting for survival will rarely fight for others.