What Does the Banking Royal Commission Mean for You?
From mortgages to insurance and super, here’s how you might be affected.
There’s been a lot in the news about how financial products and services might change after the findings of the recent Royal Commission.
Here are a few examples of how you might be affected:
Investors in big banks? Most of us have some investment in the banks due to superannuation. The value of the big four rose by $20 billion on the share market after the Royal Commission report was handed down, recovering about one-quarter of the value lost since the Royal Commission began.
Victims of bank greed? At least three companies facing prosecution over fee for no service: AMP, ANZ, CBA, NAB and Westpac will refund customers at least $850 million. It’s not yet known who might face criminal charges. “I consider it open to a jury to conclude, beyond reasonable doubt” that these companies engaged in conduct that was “dishonest according to the standards of ordinary people”, Commissioner Hayne said.
For those who can’t get compo from a bank, the government will also establish a compensation scheme of last resort going back 10 years and provides $30 million for past claims of misconduct.
Mortgage borrowers? Tighter lending standards will remain after Hayne recommended it. Hayne also recommended customers pay mortgage brokers upfront and commissions from banks be banned. The government has said it will only ban trailing commissions, not upfront commissions, but Labor may yet go further if elected. Brokers also face a new best interests duty and possible regulation as financial advisers. Brokers say interest rates will rise as a result of less competition in the industry.
Insurance policyholders? Commissions on life insurance and general insurance products could be wound back over the coming years, which might lead to lower premiums (but it might also make those industries less competitive as fewer switch). There will be no more unsolicited phone calls trying to sell you financial products, and there will be no cross-selling of super or insurance by banks or their advisers.
Financial advice customers? Tighter regulation is coming to financial advice – those who provide personal advice will have to be registered and the industry faces a central disciplinary body. Planners won’t be able to charge fees for no service anymore, and any ongoing fee arrangements would need to be reviewed annually by the client and recorded in writing.