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The circus truly came to town in February, when the royal commission into misconduct in the banking, superannuation and financial services industry commenced.
Charging fees to dead clients was the least of the banks’ problems, once Commissioner Hayne and Rowena Orr QC got stuck in.
The fallout was equally jaw dropping as top executives quietly left their roles and the public’s attention was deflected with a witch hunt over broker remuneration.
“What is alarming is how the banks have maneuvered the royal commission to centre around remuneration instead of their own misconduct. It has been a masterful move,” says Loan Market executive chairman, Sam White.
Predicting how such a distraction could play out, White adds, “Competition will suffer if we return to a banking oligopoly and clients will be left to fend for themselves again.”
AFG CEO, David Bailey says, “It is essential that any regulatory change should not result in an economic drift away from the broker to the lender. As an industry we need to continue to keep our focus on the consumer.”
But the trickledown effect has already started, with several major and second-tier banks changing their broker commission structures.
For FBAA executive director Peter White, a best-case outcome would be the adoption of the CIF guidelines on remuneration and, although “highly unlikely”, White says a worst-case outcome would be blanket ban on commissions.
“There are no models that fully that mitigate conflicts of interest and in fact other models create a worse consumer outcome. Even a fee for service model paid by the borrower is conflicted,” he says.
His concerns also extend to the wider finance industry.
“I am concerned about the depth of mismanagement in the banks. They don't seem to be on top of their systems,” he says.
“The incredible lack of transparency in their dealings has eroded market and client trust, which is very concerning. I hope the royal commission brings most things, if not everything to light so issues can be appropriately dealt with, as we need to maintain a strong, buoyant and healthy financial system,” he continues.
Concern has also been voiced for the impact on mental health among brokers and bank staff. FBAA has long advocated for more mental health support throughout the industry and will continue this work next year.
