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Round Two: Financial advice from banks, AMP to fall under Hayne’s steely eye
The Australian 12:00am April 4, 2018
Richard Gluyas
The financial services royal commission has drawn up an extensive list of agenda items for its second round of public hearings on financial advice and all the major banks and AMP are to be fed through the wringer.
The hearings, to be held from April 16 to 27, will consider: the conduct of financial services entities that provide financial advice to consumers; compliance with the law and community standards; and the adequacy of the current legal and regulatory structure.
The Australian Competition and Consumer Commission, as well as the two professional organisations for financial planners and the privately owned Dover dealer group with an estimated $3 billion in funds under management, will give evidence on the profession’s disciplinary regime.
National Australia Bank and ANZ Bank, along with its Millenium3-aligned adviser group, which was sold last year to IOOF, will be probed on improper conduct by financial advisers.
Commonwealth Bank suffered the highest profile advice scandal when 8654 customers of Commonwealth Financial Planning and Financial Wisdom received advice between September 2003 to July 2012 and sought file reviews that led to almost $30 million in payouts.
While CBA has earned a reprieve from the commission on misconduct, it is front and centre along with AMP in the first topic for examination — the charging of advisory fees when no service was actually provided.
ASIC in 2016 found that the big four banks and AMP had billed 203,000 financial planning clients for advice that was not provided.
A report by the regulator forecast $178m in total remediation.
Also under the microscope in the second round of public hearings is inappropriate financial advice, where ANZ, Westpac/BT Financial Group and AMP will be in commissioner Kenneth Hayne’s crosshairs.
AMP and CBA are scheduled to front up for the final topic, investment platform fees.
In the meantime, all the major banks are believed to have met yesterday’s 4pm deadline for responses to last month’s final submission on consumer lending transgressions by senior counsel assisting Rowena Orr QC.
Mr Hayne asked for the submissions to be a maximum of 25 pages.
Among the many topics likely to form part of the submissions is conflicted remuneration for mortgage brokers.
Some banks are likely to have advocated switching from upfront and trail commissions to a fee-for-service model for brokers.
This would minimise the incentive under the current system to maximise the size of the loan and its duration.
Banks are also likely to have defended the use of benchmarks given the difficulty in obtaining correct income and expense data from customers.
After the financial advice hearings, the commission will turn its attention to business lending.
The third round of public hearings are likely to take place towards the end of next month.
