Welcome to the First Exchange of 2019
In this edition, with the Royal Commission dominating headlines and casting a shadow over the Australian finance industry, we explore the outcomes and simplify the recommendations, highlighting how you might be impacted. We also take a look at the recent decision that enables independent mortgage brokers to continue to challenge the big banks and lending institutions and how this helps consumers by keeping the loan marketplace competitive. Details of our new Managed Discretionary Account (MDA) service have been added to our Financial Services Guide and we provide a link for you to read more about this new service. Finally, we are proud to introduce a special cause that is very close to our hearts that we hope you will support too.
Royal Commission Recommendations
In his final report, Commissioner Hayne identified 74 recommendations along with 24 referrals for potentially criminal conduct by banks and institutions. The recommendations span multiple arms of the industry, with major implications for the practices implemented by businesses throughout the sector.
To bring it all into perspective and provide clarity on exactly how all the players will be affected, here is an overview of the main recommendations that will shape the industry going forward.
Compensation
Create and implement an industry-funded compensation scheme of last resort for people hurt by the finance sector who are unable to obtain reparations from the offending financial institution.
Regulators
Maintain the so-called “twin peaks” model of financial regulation with both ASIC and APRA, but ensure they are monitored by a new authority – independent of the industry and government – that would make certain they are carrying out their responsibilities.
Revamp ASIC’s approach to enforcement, shifting to a focus on court action as opposed to mere infringement notices, which will now principally be used for smaller administrative failings.
Banking
Track any breaches of lending laws via expanded and tighter Banking Executive Accountability Regime laws.
Revise the banking code of conduct so those in rural or remote areas and those with poor English skills can have equitable access to banking services.
Superannuation
Create a single default super fund for all workers that they retain across employers.
Place a halt on any advice fees deducted from MySuper accounts and completely prohibit advice fees for non-MySuper accounts unless certain requirements are met.
Trustees of a superannuation fund must not assume any obligations other than those related to performance of their duties.
Financial Advice
Create a registry of all financial advisers and employ a new disciplinary system administered by a single independent disciplinary body.
Ensure clients are presented with an annual review of all ongoing fee arrangements.
Financial advisers who do not operate independently must disclose this fact to the client in writing before providing personal advice.
Insurance
Redefine the handling and settlement of insurance claims as a financial service with removal of the claims handling exemption.
The unfair contract terms provisions in the ASIC Act should apply to all insurance contracts.
Mortgage Brokers
Require mortgage brokers to act in the best interests of the borrower, not the bank or institution providing the loan.
Switch the current system so that borrowers pay the mortgage broker for their services as opposed to the lenders paying them.
A Big Win for the Mortgage Market
Commissioner Hayne’s final recommendations have received a mixed reception – especially his endorsement of the abolition of payments to mortgage brokers and a blanket ban on commissions, including the much debated and often misunderstood trail commissions.
With nearly 60% of all new home loans coming from the independent channel, the reforms, if enacted, would make the independent broker channel unsustainable. Effectively, this would force consumers to borrow from the big four banks and kill competition in the market while over-inflating the cost of borrowing for millions of Australians.
Thankfully, the government announced that it will not be prohibiting commissions for brokers and will instead review the situation again in three years.
What does this mean for consumers?
Keeping the independent mortgage broker channel alive means there will be competition in the home lending market. The flow on effect of this is that consumers have more choice, improved access to loans and a better chance at securing loan terms that suit their circumstances and financial goals.
New Financial Services Guide
We have updated our Financial Services Guide (FSG) to incorporate our new Managed Discretionary Account (MDA) service.
Financial Decisions has recently been authorised by the Australian Securities & Investments Commission (ASIC) to advise and deal in a MDA service. This service allows us, through our advisers, to manage a portfolio of assets for you on an individual and discretionary basis upon agreement with you.
MDA’s eliminate the need to continually obtain your agreement or instructions to sell, buy, apply for, or redeem financial investments. It will enhance our agility in response to market shifts, is convenient and also will help to manage the costs associated with comprehensive funds management.
Please click here to access our new FSG and read more about the MDA service.
Helping Build the Miracle House
As a firm, we are dedicated supporters of the Read family, and want to help parents Jemimah and Ben in their quest to construct the ‘Miracle House’; a purpose-built wheelchair and disability friendly home for their children.
Triplets Gideon, Anwen and Mahalah Read were each born with Merosin Deficient Muscular Dystrophy and Restrictive Lung Disease.
The Miracle House is designed to provide the Read’s with the tools needed to give the triplets a fighting chance at a full and independent life. Along with other corporate sponsors, our aim is to assist in the raising of funds that will:
- Supply the children with specialised medical equipment and mobility aids.
- Install a Hydrotherapy Pool that is crucial to both attaining and maintaining the children’s mobility.
- Help source and obtain specially modified transport.
- Give the children long-term educational access and support.
- Provide Jemimah and Ben with respite care and support.
You can read more about this amazing family at www.readtripletsinc.org.au and we encourage you to join in and support the Read’s efforts in giving the triplet’s the best quality and happiest life possible.
We’re always here to help! Please call us on (02) 9997 4647 to speak to an adviser if you have any questions or would like to make sure you’re getting the most out of your financial strategy.
Disclaimer: This publication has been compiled by Financial Decisions (AFSL/ACL Number 341678). Past performance is not a reliable indicator of future performance. While every effort has been taken to ensure that the assumptions on which the outlooks given in this publication are based on reasonable data, the outlooks may be based on incorrect assumptions or may not take into account known or unknown risk and uncertainties. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information and any advice in this publication do not take into account your personal objectives, financial situation or needs. Therefore you should consider its appropriateness having regard to these factors before acting on it. While the information contained in this publication is based on information obtained from sources believed to be reliable, it has not been independently verified. To the maximum extent permitted by law: (a) no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up-to-date or fit for any purpose; and (b) Financial Decisions nor its employees are in any way liable to you (including for negligence) in respect of any reliance upon such information or advice. March 2019
Contact: Financial Decisions PO Box 484 Mona Vale NSW 1660, T 02 9997 4647, F 02 9997 7407