AFA says RC hit the wrong targets

Small businesses within the financial planning industry were not given an appropriate chance to defend themselves in the Royal Commission, according to the Association of Financial Advisers (AFA).

In a full response to the Royal Commission recommendations, AFA chief executive, Phil Kewin argued that while the commission may have been aiming at the banks and big business it was small business financial advisers and mortgage brokers who had been hit.

“Business valuations for financial advice and mortgage broking small businesses, many of which are family owned and run, will be significantly impacted,” he said. “As a result of recent ongoing reforms and further recommendations from the Royal Commission, many small businesses are now under threat. This also further threatens the accessibility of affordable advice.”

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“If the financial advice profession was on trial at the Royal Commission, then financial advisers should have been given the chance to defend themselves.  Regrettably the Royal Commission took evidence from large institutions and not the small business sector,” Mr Kewin said.  

On the question of the Royal Commission’s view on life insurance commissions, the AFA chief executive said while his organisation welcomed the recommendation that they should remain unchanged in the lead up to the review of the Life Insurance Framework (LIF), “it rejects the Royal Commission’s clearly expressed preference that they should be further reduced and in fact removed, following this ASIC review, particularly given there was no informed debate on this issue”. 
“Commissions are the internationally accepted method of remuneration for the provision of financial advice on life insurance, and this model works in the interests of consumers by reducing the cost of obtaining quality life insurance and advice,” Kewin said. “They are a form of remuneration, not an incentive, that pays for far more than just product placement, something we pointed out in several submissions to the Royal Commission.”

The AFA chief executive also complained that the Royal Commission’s final report had not corrected key errors the AFA had pointed to in its interim report.

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Here is what really went was a clean hit at close range on self employed planners and mortgage brokers to take the heat off bank executives, incentives and in house bank culture:

The RC exposed the small mindedness of the main participants whose normal work is confined to TRANSACTIONAL duties.
The behavior of QC Orr had to be seen to be believed; reading from a script and questioning victims ruthlessly on the finest of details of the Law and regulations. Her treatment of Henry was appalling and completely unjustified.
How much time was spent on Industry Funds where a previous RC found criminality and thuggery rife by staff of some Super Funds? NO SIGNIFICANT TIME! Some of the smart cracks by C Haynes were neither amusing nor respectful of those being questioned. No wonder one victim collapsed during interrogation. Much the same as if he had been waterboarded. Yes some in the high chair certainly elevate themselves above everyone else, but for what reasonable purpose?

Does C Haynes expect every person in OZ to have so much surplus cash that they can pay up-front for ADVICE, which customers sorely need? How wrong can he be? How out of touch is he? A heck of a lot!
The same with asset based fees. Does he recommend the approach common amongst Lawyers and Accountants where every activity/item in the ADVICE Process is tracked and charged out? One Fin Planning Consultancy group has shown that this practice can double or treble the fees paid by customers and should be adopted by Advisers. Profiteering on a Grand Scale. Oh, and the consultancy fees can be as high as $250,000!!!
The IAAFP has recommended the dropping of FUM fees but their reason for being is based on being different to the AFA and FPA and is simply a marketing ploy by the well rewarded management, I suspect. Perhaps they can prove otherwise.

Ken Henry responded to Rowena Orr's line of leading questioning in the most civil way he could on that day.
It was easy to tell what he really wanted to say to her, but he controlled himself in a difficult situation.
Orr's line of questioning across the entire inquisition was pre-meditated, manufactured and constructed to have the witness in the corner she wanted and to appease the already determined outcome of the RC.
Kenneth Hayne took exception to a credible witness who just wasn't prepared to accept every line that Orr threw at him like a naughty school boy......Orr asked questions and Henry answered them.
Just because Henry may not have answered them in the manner Orr may have wanted or that Hayne expected is not a basis for Hayne to conclude the NAB either didn't get it, or weren't capable of addressing issues.
I suggest it is about payback for not falling into line and in some ways taking it up to Orr, rather than being walked over.
It is obvious from the beginning that the intended outcome of the RC was already decided upon at the commencement.
Certainly there are very clear examples where some of the behaviour and processes were not acceptable at all, but to
slam the entire financial services industry including mortgage brokers is absolutely unacceptable.
In a free market economy where the price of goods and services should be allowed to be determined by market forces, the level of over arching control is becoming dictatorial and harmful.

NAB had a track record for poor behaviours and both Chairman and CEO were taken to task by a top barrister. They were fools to be dismissive in their responses and Henry has admitted as much. From an economist point of view I thought some of Henry's answers were very good but he was not there to give an economics tutorial.
The Royal Commission has revealed appalling behaviour across as wide gamut of the banking and financial services industries. Many people at the senior levels have conducted themselves in a way that is 'absolutely unacceptable'. Time to stop making excuses for their greed and their behaviour towards ordinary citizens.

If senior executives at senior levels displayed and practiced poor behaviours, it is not a commensurate response for Kenneth Hayne to exercise his significant power and recommend changes that will detrimentally impact the consumer and effectively ruin many small to medium financial services businesses that have provided high levels of advice and service to their clients over many years.
The recommendations to reduce risk insurance commissions to zero, to remove mortgage brokers commissions and to remove grandfathered remuneration payments is not going to advantage the consumer, it is going to drive up the cost of advice significantly and therefore remove many peoples ability to afford meaningful advice and direction.
The punishment to the banks is nothing in relation to what they can immediately afford to pay and remediate.
It is like getting a parking fine as the damage to the banks is not financial, it is reputational and a brand and image problem.
They will now go about spending tens of millions on warm and fuzzy advertising and brand re-building to gain market share.
The terrible and destructive impact will be to the businesses who have done the right thing, but will now pay the ultimate price for something that was not of their doing.
Where is the fairness in that response and in Hayne's recommendations ?....there is none.

Mortgage brokers had 29 AFCA complaints, the banks had several thousand. End of story. It is a Melbourne Club stitch up.

Don't blame the Royal Commission for not having enough time to dig into the industry super funds. The Coalition Government with the connivance of their banking mates limited the time for the Commission and limited the funds to curtail the Commission's work. Both lots should've known that there was so much shit in the banking and financial services companies and their retail funds management and so took up all the time of the Commission.

Scott Morrison today said he wanted Mortgage Brokers around in 5 year. He said nothing about Risk advisers. Why not? Because the mortgage industry bodies have come out fighting immediately and are already appearing to be winning their case. Our bodies the AFA and FPA as usual just make a few noises but ultimately end up conceding and throwing their members under a bus. The AFA and FPA are a disgrace by comparison to other industry bodies.

Mortgage broking will be made illegal within 5 years as they enforce recommendation 1.5 and hand the industry over to financial advisers. But hang on today’s FASEA output on the code of conduct says volume based rem is outside code. But Hedware’s hairdresser can still set up a referral partnership with a bank and get 0.5% upfront on any loan sent their way. Nothing to see here!

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