Royal Commission flags fees and regulatory failings in report

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has highlighted a toxic sales culture and a failure to regulate wrongdoing as major issues in the interim report handed down by Commissioner Kenneth Hayne today.

The report flagged issues with fees charged for little or no service provided as deeply problematic, including questioning how it reached a point where fees were charged to deceased people.

"Too often, the answer seems to be greed - the pursuit of short-term profit at the expense of basic standards of honesty," Hayne wrote in the report. "How else is charging continuing advice fees to the dead to be explained?"

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Hayne said that a culture clearly existed where profits were put first and staff performance at every level was based on sales and profit.

The report also suggested that regulators had failed to act sufficiently to sanction wrongdoers.

"When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done," Hayne wrote.

He found that while laws already existed prohibiting much of the problematic behaviour, most especially in requirements that Australian Financial Services Licensees provide services "efficiently, honestly, and fairly", the answer to reform may not lie in extensive regulatory change but rather simplification of laws and better enforcement.

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After all the forensic questioning by the various SCs assisting the Commissioner a main criticism in the 4th paragraph of the Executive Summary of the Interim Report is that "How else ("..the answer seems to be greed") is charging continuing advice fees to the dead to be explained?"

A normal Financial Adviser would explain that use of an IDPS Platform needs continued monitoring because the Estate Executor/Trustee needs continuing advice as:
Funds Managers have nervous breakdowns and lose the plot,
Asset Allocations need changing,
Funds Need changing (e.g. At the start of 2018 all exposure to Emerging Countries Funds needed to be dropped, or there may be a case to reduce exposure to Growth Funds and swap to value Funds, or certain Fixed interest Funds need to be dropped as interest rates change). This applies and is justifiable irrespective whether an "active" management stance is employed or not.
The advent of a Financial crisis may be seen to be coming by an astute adviser and the recommendation may be to go to cash lest in the space of as little as 2 months a market may have fallen substantially. Beneficiaries sometimes need cash and not a long term investment portfolio.
A grant of Probate and the winding up of an Estate may be fast or VERY, VERY SLOW and keeping an IDPS Platform Investment in place may be quite justified and often is.
If the portfolio is a collection of Blended Funds, even then continuing surveillance is justified. Who remembers the crash of Cap Stable Funds in the 1990s, which many of us saw approaching and advised clients to go to CASH!.

I put it to you Commissioner that you have been misled by a political agenda aimed at finding instances of "poor advice" rather than critically examining carefully why Financial Advisers are successful in managing clients' affairs for the best interest of clients, even Estate Executors and Trustees!

Neither simplification of laws or better regulation will cure mismanagement, misconduct and malfeasance if bankers, their directors and the regulators cannot tell right from wrong. ASIC accepts the toxic ASX corporate governance principles that ignores systemic unethical conflicts of interests while APRA enforces the toxic governance promoted by the principles. The toxic conflicts are explained in my published writings that includes the study guides in the first educational qualification for company directors in the world that I initiated in 1971 and became a co-author in its launching in 1975.

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