After 68 days of hearings, 130 witnesses (one collapse), over 10,000 public submissions and one particularly awkward photo op between Commissioner Kenneth Hayne and Treasurer Josh Frydenberg, we were given the final Banking Royal Commission report.
We wrote extensively in May and December last year as the hearings progressed and the horror stories kept coming so we won’t reflect on all that is wrong again, but focus on the changes coming and how they impact our business model (spoiler alert: they don’t).
In all there were 76 recommendations from the Royal Commission, which both sides of parliament have said they will act upon.
Notable recommendations include:
- Mortgage brokers will be required to act in the best interest of borrowers – mortgage broker commissions to be banned over two to three years, first on trail commissions on new loans and then on all others;
- Grandfathered commissions paid to financial advisors to be repealed as soon as reasonably possible;
- All ongoing fee arrangements must be renewed by clients annually;
- Lack of independence must be disclosed; and
- Vulnerable consumers will be protected through clarifying and strengthening the unsolicited selling provisions.
Vertical integration wasn’t really touched upon which was surprising. The model where banks can earn millions in fees from cross-selling, on top of the millions earned from lending out people’s money to other people, still leaves room for conflicted advice, but hopefully some time out on the naughty step will fundamentally change their advice process. Indeed, we’ve already seen the NAB Chairman and CEO fall on their swords.
So, how does this affect Keep’s business I hear you ask?
Not at all. We set up Keep Wealth Partners to be free from such conflicts; this means we are always able to act in our clients’ best interests. In fact, we’ve seen a big uptick in clients joining us because of our independent advice model, so it’s business as usual.
How do I trust my advisor?
Time and again industry surveys show trust is the most important influence for consumers seeking financial advice. It’s sad that it’s taken a Royal Commission to highlight all the ways our industry seeks to erode that trust and provide recommendations to combat them.
Those of you with a good rapport with your advisor will understand the value of that relationship, both in a tangible sense (strategies, performance and fees) and an intangible sense (always being available, peace of mind and a partner through good times and bad).
In the wake of the Royal Commission wrap up and for those that aren’t sure, here are three starter questions to ask:
- Does my advisor understand my needs?
- Do they take commissions?
- Are they transparent about their fees (and here we mean all fees – advisor fees, brokerage, fund manager fees and all others that can add up in the background)?
For a more comprehensive list of questions and in-depth overview of what to consider in choosing the right advisor see Moneysmart’s tips for choosing a financial advisor.
Alternatively, speak to the experienced team at Keep Wealth Partners. We’re proudly independent, which means we are not tied to any financial institution, do not accept commissions and we will always put your interests first.
Keep Wealth Partners Pty Ltd (AFSL 494858). This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if the strategies and products are right for you.