“O wad some Power the giftie gie us, to see oursels as ithers see us!”
As the financial services industry pores over the preliminary findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry it would do well to reflect on the words of the 18th century Scots poet, Robert Burns.
It is truly a gift to understand how others see us.
Because the preliminary findings presented by the Commissioner, Kenneth Hayne, provide a clear picture of what the financial services industry and financial planning in particular looks like to a reasonably objective outsider.
While there is some truth in the complaints of the Association of Financial Advisers (AFA) that some of Hayne’s preliminary findings demonstrate a lack of understanding of the financial advice industry, it needs to be understood that the commissioner is not an industry insider, he is by any measure an objective observer appalled by some of the things he has seen and heard.
Financial planning is a complex sector and it is arguable that the succession of legislative initiatives which have been imposed over the past decade from the Future of Financial Advice (FoFA) to the Life Insurance Framework (LIF) have made it more so. But what planners need to understand is that most of the public neither understand nor care about either the regulatory nuances or the associated niceties.
Plainly put, the average consumer does not care about the justice of retaining commissions for life/risk advisers and the average consumer probably thinks FoFA grandfathering pertains to the upcoming aged care Royal Commission.
Thus, while the AFA and other major financial services organisations can and should respond to Hayne’s preliminary findings, they would be wise to avoid seeking to defend the indefensible and, alternatively, seek to navigate a way into the future.
So, what is indefensible? Charging fees for no service, for a start, followed closely by seeking to ‘game’ the FoFA rules to retain access to grandfathered commissions.
What is defensible? Arguably retaining life/risk commissions in circumstances where the LIF has barely got into stride and where there appears to be genuine evidence that counsel assisting the Royal Commission failed to fully understand what differentiates life/risk advice.
There are many other questions raised by Hayne which are defensible but those making submissions need to remember that the Royal Commission still has a long way to run and that other important elements will arise when the preliminary findings around both superannuation and insurance are released.
In the meantime, those financial planners who believe they can hold back the tide of change by travelling to Canberra to lobby backbenchers would do well to reflect on the bipartisan horror expressed at Hayne’s preliminary findings and the reality that politicians facing an election within the next eight months will not be in the business of turning back the clock.
The Royal Commission’s preliminary findings have arguably fallen well short of precisely reflecting the realities of the industry but it has, nonetheless, provided a picture of how the industry is and will be perceived. The industry’s participants can expend energy arguing the toss or they can take the lead in driving necessary change.