Remember the efforts the Federal Government went to obviate the need for a Royal Commission? Remember the manner in which the House of Representatives Standing Committee on Economics was tasked with scrutinising the four major banks?
It is now history that despite the hearings conducted by that Parliamentary committee and the then Treasurer’s assertions that it was a sufficient measure, the Government nonetheless found itself compelled to hold the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Now, three years, a Royal Commission and a Federal election later, the Standing Committee on Economics has again been handed an important strategic task – inquiring into progress made by relevant financial institutions with implementing the recommendations of the Royal Commission.
While it would be tempting to regard this announcement by the Treasurer, Josh Frydenberg, as just more post-Royal Commission window-dressing, it is worth noting that this time the Parliamentary Committee has been empowered to look beyond the major banks. This time it is empowered to look at “other major relevant financial institutions and leading financial services associations”.
The reference to “other relevant financial institutions” does, of course, bring into scope companies such as IOOF Limited and AMP Limited and the major insurers. Also, arguably, it brings major superannuation funds into scope. The reference to financial services associations brings into play not only planning groups such as the Financial Planning Association (FPA) but also superannuation groups such as the Association of Superannuation Funds of Australia (ASFA), Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST).
It is in this context that it is worth noting the degree to which the major banks have sought to move ahead of the Royal Commission findings by putting in place a range of measures to take themselves out of the spotlight. They are almost all in the process of or already have exited wealth management, some have changed their leadership teams and most have altered remuneration arrangements.
So, if the major banks have succeeded in lowering their exposure to problematic areas such as advice, then the Parliamentary Committee will obviously be more disposed to looking at other segments of the industry and this appears to coincide with the Treasurer’s promised review of retirement incomes and the criticisms of the current superannuation regime being expressed by a number of key Coalition back-benchers.
For better or worse, it seems that the broad financial services industry and superannuation funds in particular should brace for a significant ongoing debate which, depending on the Government’s assessment of public mood, may act as a precursor to a range of policy changes including with respect to the timetable for lifting the superannuation guarantee (SG).
The hearings of the Standing Committee on Economics should be monitored with close interest.