The Federal Government will be acting in defiance of the findings of the Royal Commission if it allows “carve-outs” from product design and distribution obligations (DDOs) being demanded by the banks, advice, insurance and wealth management sectors, according to Industry Super Australia (ISA).
The ISA has used a submission to the Senate Economic Legislation Committee review of the legislation intended to underpin the Government’s financial services product design and distribution laws to claim the outcome has been heavily, adversely influenced by the retail banking sector.
Further, it has claimed that if the carve-outs are allowed to stand, it is doubtful the design and distribution obligations will be enforceable in practice.
Suggesting the original legislation had been watered down, the ISA said it was “aware that the consultation process on the draft legislation has been heavily influenced by arguments made by some in the industry that the regime would be unworkable for product issuers”.
“Given the case studies before the Royal Commission we think the purpose of the DDO and product intervention powers (PIPs) need to be reconsidered from the perspective of consumer protection rather than product issuers,” it said.
“It appears that vested interests in the financial retail banking, advice, insurance and wealth management sectors have been successful in securing carve-outs from the legislation. The Committee now has an important opportunity to re-consider those carve outs,” the submission said.
“These carve-outs are being proposed at a time when the Banking Royal Commission has recently uncovered a series of horrific case studies of significant harm and detriment to many hundreds of thousands of consumers,” it said. “They suggest that much of the financial services industry - and Treasury as the key policy regulator - are failing to learn from the lessons of the Royal Commission.”
“If the design and distribution obligations and product intervention power had been implemented earlier and in line with the original policy intent of the Financial System Inquiry, then arguably some of this consumer harm could been mitigated and perhaps avoided.”
Comments
Has it ever occurred to the ISA that after all of their attacks on the banks/advisers & having wasted close to one billion dollars of their own members funds on advertising, that maybe, just maybe, some investors want to deal with a financial adviser, are quite happy with their financial adviser, and are quite happy to pay for a financial adviser? When will the ISA ever give up & stop wasting their members money on advertising? Or maybe the Govt should introduce a tax on payments made to entities outside the Industry Fund?
Industry funds are like the now-defunct Australian automotive industry - inferior to the competition, protected by Labor, and viewed parochially by many.
Industry Funds are the carve-outs King! guaranteed money for Jam and now people have choice of funds they can't do business without paying for Tennis and Footy Tickets. Can't wait for the market to down and watch another Industry fund Top performing MTAA fund go from the top right to the bottom for having to much "defensive" Property allocation *cough cough* Growth Asset.
Agree with ISA wholeheartedly, carve outs undermine the integrity of the financial sector, therefor need an immediate end to the insane, corrupt carve outs that were negotiated by the ISA back in the FOFA days. Equal playing field with ISA as accountable for ALL their 'advice' and product recommendations by their salespeople and telemarketers.
Add new comment