If the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has achieved nothing else, it has pulled back the veil on senior executive corporate behaviours and how they adversely impact on the reputation of the financial planning industry.
What was revealed to the Royal Commission via the appearances of AMP Limited and the Commonwealth Bank earlier this month was that, very often, the disadvantage suffered by clients was not the work of their financial planners but, rather, the product of company policies driven by a desire to protect their balance sheets.
That AMP Limited appears to have had a policy of continuing to extract fees from orphan clients for up to three months is unconscionable but it is something which was beyond the power of individual advisers to influence.
Similarly, individual financial planners cannot be held responsible for the approach to breach reporting adopted by Commonwealth Financial Planning and Count Financial with respect to orphan clients.
Much of what was disclosed at the Royal Commission had been covered off by the Australian Securities and Investments Commission’s “Fee for no service” report but the disclosures with respect to AMP appear to go much further and suggest that the regulator was not entirely aware of the degree to which a breach was not the result of a mistake but, rather, a result of the deliberate execution of company policy.
One of the questions which arises from what has been heard during the Royal Commission is whether the financial planning industry needs to be not only professionalised but also restructured to remove compliance with client best interests from the exingencies of corporate balance sheets.
Core to this outcome is ensuring that it is professional financial planners who fully own the client relationship – something which would help overcome the issue of clients whose relationship with their bank or AMP-employed planner is so vague and tenuous that they do not even know when they have become “orphaned”.
Sadly, while most Australians would be fully aware of the name of their medical general practitioner or even their accountant, the nature of their relationship with advisers employed by the likes of AMP or the Commonwealth Bank is far more tenuous. This is not so much the case where the clients of smaller financial planning practices are concerned.
A number of the major banks have been lowering their exposure to the wealth management industry and this month’s events in the Royal Commission suggest it would be desirable if this trend were to continue, particularly where there exists a conflict between the implementation of corporate strategies and client best interests.
Perhaps the way ahead is the further pursuit of professionalism via the structures being created by the Financial Adviser Standards and Ethics Authority, code monitoring bodies and a higher degree of self-licensing.