Australian Prime Minister announces there will be a Royal Commission into the Financial Services Industry
Mr Turnbull says Australia's financial system is admirable but there have been instances of poor practice.
Consumers must be protected, Mr Turnbull says, and the financial services sector must remain stable.
Do you agree with the Government's decision?
No, dont agree, Most likely it will end up putting more red tape, more paperwork. What they need to do instead is to have every sales person undergo a course in Ethics & Empathy. It will have much more positive outcome on the results.
A Royal Commission will cost a mountain of cash, but it will be money well spent if the findings and recommendations are sensible and add to the value of the services provided across the board to clients. And I doubt very much that this will take place.
Let me provide an example of something that is neither sensible nor adds value. On 1 July 2016 some moron decided that Chartered Accountants (who need to study for around 8 years to get their designation) are not sufficiently qualified to provide advice to their clients on matters pertaining to superannuation, such as whether to commence or commute a pension, open a SMSF etc.
This meant that for a whole bunch of stakeholders the person probably best placed to provide advice across a range of inter-connected matters, such as tax, retirement, asset-protection, estate-planning, retirement planning and the like was not able to advise on one key element of this broad issue.
That means that in many cases, the client will go to their CA or CPA for MOST of their advice, because they understand the "whole picture" and are able to view strategies holistically, so as to advise on the effects across many areas.
Then the client will have to go to a potentially unrelated financial planner, who may or may not have any expertise in the wider areas addressed by the CA. This advice may or may not take into account the other factors or flow-on effects of a particular strategy.
If the client is fortunate, the planner and the accountant will work together and collaborate to provide the best outcome for the client. This is by no means guaranteed, because accountants and planners do not always agree, or are nervous about sharing information, or a frightened of losing the relationship.
So the net result in many cases is:
a) not optimal for the client, and
b) more expensive
net result: no increase in the benefit provided to the client, however almost guaranteed to cost more.
So, forgive me if I seem cynical here, but I doubt that any Royal Commission will result in an improvement of the situation, unless the terms of reference take into account the need to provide to the client the most sensible outcome.
The banks tell us they have nothing to hide so a Royal Commission will be a waste of time. I am not so sure. The banks won’t have teams of lawyers and advisors drafting polished responses to requests from government and regulators. Instead, existing and former executives are going to need to face a grilling in a court-like atmosphere. History tells us that there are going to be things uncovered that the banks have been sitting on. This will be interesting!
Although I feel that a RC is not the right approach and that the FSI undertakings are cheaper and quicker to do and look at bit-sized pieces rather than one large expensive lump, but so long as the terms of reference and the undertakings of the commission do not overlap what is already being done by ASIC / APRA / Treasury, then if it only runs 12 months albeit this yet to be determined by the Commission as they have an overriding position on how long this will take so its not the governments decision, then maybe it will uncover other issues that as yet have not been dealt with and potentially buried. Time will tell its value or not. Pete White FBAA