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Update – Banking Royal Commission

The revelations coming out of the Royal Commission, initially focussed on the Banks and AMP, have been damning. With this in mind, it is worthwhile to make a few comments on the findings so far and where we as a business stand on these issues.

Focus of Royal Commission

• A major focus is the concept of “vertical integration” in financial services. This describes where the Banks own both the financial planning advice business as well as the product – the obvious concern being the advice is conflicted by the product recommendation.
• Other concerns include these institutions failing to act in a timely way on advisers providing bad advice and instead protecting their profits.
• Best interests duty – this refers to the requirement for advice to always be in the “Best interests” of clients.

Outcomes so far

• The Banks/AMP have had very much a product sales culture (i.e. feeding into their own products) and have not supported or incentivised their advisers to provide ongoing service, which has been highly evident in the findings so far.
• Confidence in our institutions has been further undermined with many examples illustrating a focus on shareholders and executives not their clients.
• There has also been other examples of complaints where the advice provided has not been in the best interest of clients.

The Banks, along with the Industry Super Funds (who may well be the next target), own in some way shape or form a large part of the Financial Services industry.  The Royal Commission is likely to result in the Banks exiting from the Wealth Management side of the business and just being “Banks” which will be a positive outcome.  Also, how financial advisers are remunerated for advice and ensuring there are no conflicts of interest, real or perceived, will also be an important focus and should result in positive changes for the industry.

For MP Financial Planning we are primarily a fee for advice business, and the services we provide are absolutely focussed on achieving our clients’ goals and aspirations. We value transparency and welcome these changes, we will look to be on the front foot to ensure we provide you with advice you can trust and act in your best interests.

However, if you have any concerns or questions, please don’t hesitate to contact your adviser and we would be more than happy to discuss.

written by:

Aaron McCracken

Aaron has over twenty years of experience in the financial services industry working with large companies and small businesses across all aspects of financial planning. He has broad experience across superannuation (including self-managed superannuation), investments, estate planning and personal insurance, retirement planning and business succession planning.
Aaron is passionate about the value of professional, client-focused advice and enjoys working closely with clients to help them make smart decisions with their money, as well as aiding them to clarify and achieve their financial aspirations.