The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has released its highly anticipated Final Report including 76 recommendations.
On 4 February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its highly anticipated Final Report. The central task of the Royal Commission was to inquire into, and report on, whether any conduct of financial services entities amounted to misconduct and whether any conduct, practices, behaviour or business activities fell below community standards and expectations. The straight answer is yes.
The Report states that there is no justification for maintaining grandfathering provision, and therefor, recommends banning grandfathered commissions for financial advice and life insurance products, and repealing grandfathered provisions for conflicted remuneration.
Both mortgage brokers and financial advisers commonly receive a combination of upfront and trial commissions: upfront commissions when the product was sold, and trial commissions in subsequent years. Between the years of 2008 and 2018, the financial advisers providing advice at three out of four AMP's advice licensees obtaining their highest source of revenue from ongoing of trial commissions.
One overarching theme recurred: the difficulties that trustees faces in dealing with conflicts between duty and interest. The Report makes a number of recommendation that have capacity to disrupt the superannuation industry. These include:
The Report recommends that all financial services entities should take steps to:
While the Government has stated that it will 'take action' on all 76 recommendation made in the Report, it is important to remember the federal election will occur this year and expected to be held in May.
With limited sitting days for Parliament left before then, it is likely that most of the recommendations will not be legislated on before the upcoming election. Therefore, whether the recommendations are implemented through legislation, and what form they eventually take, remains to be seen.