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Second round of Royal Commission hearings show professional standards need to be adopted now

by Lewis Panther | 11 May 2018
AMP chair Catherine Brenner may be the most high profile casualty of the Royal Commission into banking and financial services.

However, the resignation of Brenner, and other top brass at 169-year-old corporate giant, should be seen for what it is — the latest crisis among many to shake the financial services industry, and a signal that change is long overdue.  

Senior counsel Rowena Orr recommended a raft of criminal charges against banks and financial planning providers at the end of the second round of hearings.

Two weeks of testimony revealed a long list of industry failures culminating in AMP, Commonwealth Bank, Dover Financial, Westpac, CBA’s Colonial First State and financial planners Henderson Maxwell all being accused of breaching the Corporations Act.

In AMP’s case — Australia’s oldest life insurance company — it happened many times. Charging fees for no service and lying to the regulator ASIC has left AMP’s reputation in tatters.

The latest revelations, which have given plenty more ammunition to opponents of the industry, sum up just why it is vitally important for the sector to come together under an independent, professional body with strict standards and codes of conduct.

A Professional Banking Council — as advocated by FINSIA — would complement government regulations and the efforts of banks and financiers to improve ethics and integrity. 

A third round of hearings will take place later this month focusing on smaller businesses with an interim report planned for September.

But FINSIA chief executive Chris Whitehead, spurred on by feedback from consumers, says the industry should not wait for the outcome of the Royal Commission.

He said: “Consumers are telling us that the industry doesn’t need to wait for the key findings of the Royal Commission to start rebuilding trust by raising standards of professionalism in the financial services industry.

“It is important the standards put the customer first and are written in simple terms so that they are easy for customers to understand. 

“To be effective, customers need to easily recognise those banks that have met the standards and understand the disciplinary action that will be enforced when breaches occur.           

“FINSIA’s role would be to provide resourcing to support the Professional Banking Council.  

“In addition to the Council, an Independent Monitoring Panel will be formed to monitor the effectiveness of the implementation of the standards for each member bank.

“Some form of legislative or regulatory action on standards is certain considering the Royal Commission into conduct if the industry does not take the lead to promote professionalism.

“A number of banks have taken the lead and committed to extensive pilots with FINSIA ahead of a wide rollout of new professional qualifications.

“However, the consumer research we have conducted, clearly indicates that there is a real customer expectation and need for professionalisation across the banking industry and the time for action is now.”

That FINSIA research showed three out of five customers would trust their banks more if staff had professional qualifications. Close to two in 10 under 45s would definitely move banks to be dealt with by professional staff.
The fact that commissioner Kenneth Hayne also heard ASIC had only taken one criminal case against a licensed financial planner in a decade back in 2010 and six civil actions since 2013 — with four of those only beginning this year — shows just why the industry has to take the lead and fix the problem.
The slow nature of the investigations was laid bare during the last day of round two of the RC when it was revealed how ASIC asked the big financial institutions to shop advisers suspected of serious compliance breaches.

The five big came back with 147 cases. Yet the regulator is still working through about 60 cases.
FINSIA’s research shows that it will ultimately be down to the consumer to decide who they will trust.
Only 66 per cent of consumers surveyed by FINSIA believed staff have high ethical standards compared to 43 per cent for the Australian banking industry, which is easy to understand against the backdrop of the Royal Commission.

Mr Whitehead said: “There is still a lot of scope for improvement to rebuilding trust.

“What is missing is an industry-wide code of professional conduct that focuses on individual accountability to ensure good individual conduct and competence.”  
“This should provide mechanisms for independent monitoring, review, and individual discipline when provisions of the code are breached. It has to be supported by industry-wide professional competency standards.
“Today most bankers may have a degree but have no recognised professional qualifications, despite 2 in 5 consumers saying all staff should have professional qualifications, and 75 per cent believing that senior staff should have professional qualifications.
“Beyond professional qualifications FINSIA believes a professionalisation program to positively influence industry culture, conduct and competency is needed for industry reform and to earn trust in the minds of consumers.


  • | May 11, 2018

  • | May 11, 2018

  • | May 11, 2018

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