Date posted: 29/10/2018 4 min read

Banking Royal Commission Interim Report Submission

Chartered Accountants calls for reducing unnecessary regulatory and licensing barriers to attract and retain more accountants in the financial advice industry

In Brief

  • Chartered Accountants ANZ has made a submission on the Interim Report of the Australian Banking Royal Commission
  • The unacceptable conduct revealed in the Interim Report highlights the need to restore trust in the industry by improving professionalism and ethical behaviour
  • Chartered Accountants are trusted advisers who require a more effective regulatory model that helps to professionalise our financial institutions

On 26 October 2018, Chartered Accountants ANZ lodged its submission on the Interim Report of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services.

In preparing our submission, we consulted with members as well as other professional associations and industry stakeholders.

Thank you to all members who provided valuable feedback to us on the policy issues and questions in the Interim Report.

We have carefully considered member’s feedback and summarised the key points in our submission. Our submission encourages the Commissioner to consider member’s views in preparing his recommendations and Final Report, which is due to be released in February next year.

Submission summary

The Interim Report exposes unacceptable conduct by financial services entities and individuals that has clearly fallen below community standards and expectations. 

The conduct identified and criticised in the Interim Report has eroded consumer trust and highlights the importance of improving professionalism, transparency and accountability in our financial institutions.

It is time for the industry to work together to address poor institutional cultures, regulatory and ethical failures, and inappropriate remuneration and incentive structures.

Chartered Accountants are trusted advisers to their clients and operate within a highly qualified and professional framework.

In our view, the accounting profession provides a foundation on which to build an improved regulatory model that can help professionalise the industry.

Chartered Accountants ANZ strongly believes it is in the public interest to attract and retain more accountants in the financial advice industry in particular.

Chartered Accountants are well placed to provide good quality, affordable and ethical advice based on their based on their degree and post graduate studies, three years of mentoring, strict adherence to our Code of Ethics and ongoing CPD.

However, there is widespread agreement amongst accountants that the current regulatory and licensing regime is not working.

We believe that consideration should be given to reducing complexity and streamlining unnecessary regulatory and licensing restrictions for accountants.

We strongly support the Commissioner’s comments about the need for better enforcement of existing laws, particularly in the financial advice industry.

In our view, there is value in exploring collaborative models with professional associations, such as Chartered Accountants, that have already set a high bar for member skill and have established complaint handling and disciplinary processes.

Chartered Accountants ANZ will continue to work co-operatively with the Government, industry, regulators and standards bodies, such as the Financial Adviser Standards and Ethics Authority (FASEA), to help increase trust and professionalism in our financial institutions.

Policy issues

A summary of the key feedback received from members on the policy issues and questions contained in Chapter 10 of the Interim Report is below:

Responsible lending

  • Greater protections are required for consumers and small businesses from unconscionable conduct, misleading and deceptive conduct and unfair contract terms.
  • Responsible lending requirements and consumer protections must be balanced with the need to reduce complexity and compliance costs.
  • Consideration should be given to the impact of responsible lending requirements and other obligations on business borrowing and the cost of credit.
  • There is concern that any slow-down in lending, higher cost of credit or increased regulation will have a negative economic impact, particularly on the small business sector.
  • The role of Chartered Accountants in helping their clients with “Ready to start business” certification should be considered as part of improved processes for gaining finance and relevant statutory licences.

Financial advice

  • Accountants are trusted advisers to their clients and have an important role to play in helping to professionalise the financial advice industry.
  • Many members are frustrated and upset that professional accountants have been discouraged from providing financial advice to their clients due to regulatory and licensing restrictions.
  • It is in the public interest to attract and retain more accountants in the financial advice industry, by reducing unnecessary regulatory barriers and appropriately recognising Chartered Accountant’s significant existing qualifications, skills and professional standards.
  • Members support raising education and ethical standards to help professionalise advice. However, up to 60% of member practitioners surveyed in May 2018 said they would likely stop providing advice if FASEA’s proposed education reforms were passed in their current form.
  • It is time for the industry to work together to change conflicted remuneration and incentive structures, including grandfathered commissions and commissions on life insurance products.
  • There is increased support for moving to fee-for-service models of remuneration, with appropriate transitional timeframes.
  • There must be a clear line between sales and advice to help minimise the risk that financial products are inappropriately sold to consumers.
  • Strengthening financial literacy will help protect consumers from the pitfalls of poor advice.

Regulation and regulators

  • The financial services laws require better enforcement, rather than passing new laws and adding extra legal complexity to an already complex regulatory regime.
  • Smarter enforcement of existing laws and regulations is particularly required in the financial advice sector.
  • The role of the regulator needs to be more visible and effective. Stronger enforcement action and penalties are warranted to address the egregious examples of behaviour uncovered by the Royal Commission.
  • The need to increase consumer trust and protection must be balanced with the need to reduce regulatory complexity and compliance costs, particularly in the financial advice industry.
  • Complexity can be reduced, and better, more cost-effective enforcement achieved by streamlining and harmonising existing laws, regulations and standards. Here we see merit in greater collaboration between the relevant regulator(s) and professional associations.
  • Recently enacted measures that are relevant to the Commission’s work, such as the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017, require time to be fully implemented in order to gauge the impact on behaviours.

We will continue to keep members updated on our advocacy efforts on our website, in Acuity print and digital editions and in Insight newsletters.


Read Chartered Accountants ANZ’s submission

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Interim Report Overview

Read Chartered Accountants ANZ’s Interim Report overview

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