Recommendations for Superannuation

The recent revelation of serious misconduct in the Australian Banking, financial services, and superannuation sector has exposed pertinent issues affecting the sector. The inquiry that relied on over 130 witnesses, took over 12 months, 68 days of hearing and over 10,000 public submissions revealed gross misconduct within the sector. This has left many institutions badly exposed. These revelations have come with public outrage, tears and plenty of drama. In its findings also, the commission came up with 76 recommendations aimed at correcting the mess in the industry. Additionally, the commission also came up with 24 referrals for criminal conduct. The revelations of the Royal Banking Commission point to gross misconduct in the Australian Banking, Financial Services, and Superannuation Sector.

Superannuation

The commission came up with multiple recommendations touching on superannuation. The commission recommended that super trustees be allowed to assume obligations that only relate to their being the Fund’s trustee and not any other unrelated obligations. Additionally, the commission recommended the prohibition of advice fees deductions from MySuper account and prohibition of the hawking of super products. Consequently, it also recommended that employees be allowed to have only had a single default super fund. Finally the banning of treating of employees by super trustees to have super trustees’ fund nominated as a default fund was also recommended (Financialreview, 2019).

Banking

Several recommendations were also made with regard to banking. The commission recommended that brokers be obligated to act in the best interests of borrowers through the enforcement of a civil penalty. Additionally, the commission also recommended the banning of mortgage broker commission for two to three years and suggested that mortgage brokers be subjected to similar laws with financial advisers responsible for offering personal advice (Financialreview, 2019). Finally, it recommended the bringing of retail car dealers into the credit act.

Financial advice

The commission also came up with various recommendations touching on financial advice. One of its notable recommendations was the renewal of all ongoing fee arrangements by the client once per year. Similarly, the commission also rooted for the disclosure of the financial adviser’s lack of independence to clients as well as the replacement of the Grandfather’s commissions. In the same way, the commission recommended the reduction of insurance commissions to zero and the review of exemption of commissions on consumer and general credit commissions. Finally, the commission recommended that for the subjection of all financial advisers offering personal financial advice to a single disciplinary body (Financialreview, 2019).

Recommendations for Banking

Organizations are by law required to act in the best interests of their various stakeholders. Unethical conduct can lead to legal prosecutions, loss of trust and negatively impact the reputation of an organization. One of the key findings of the Australian Royal Commission was the ethical misconduct of Commonwealth Bank of Australia with regards to financial services. On this note, the bank was found to have been charging its clients fees for non-existent services. For example, the bank was found to have charged fees to a customer who had been dead for more than ten years (Seeto, 2019).

 The ethical misconduct involved in this scenario involved the bank’s failure to act in the best interest of its customers. Specifically, the bank not only charged services for nonexistent services but also, it was also accused of falsifying loan documents for its clients and giving wrong advice to some of its clients. The ethical misconduct, therefore, affected the Bank’s customers, the Australian community, regulators and employees.

Customers are the most important asset for any organization. Organizations are therefore expected to be ethically responsible towards their customers. As a result of the company executive’s greed, customers were the most affected. Some customers were forced to pay a compulsory fee for services that were not provided (Seeto, 2019). Others lost almost everything that they had because of receiving the wrong advice from the company. Besides several other customers suffered as a result of the falsification of their documents.A  couple from Victoria was for example forced to repay a wrong amount higher than what the bank had loaned them as a result of the falsification of their loan documents (Mao, 2019). This impact of this ethical misconduct by the bank was the loss of their four investments and home. Customers of the bank were therefore largely affected by the misconduct. Also, the community expects an organization to prioritize its welfare and sustainable development. Through the ethical misconduct of the bank, however, this was not achieved. The employees of the Bank were also primarily affected (Eyers and Shapiro, 2019). The scandal did affect not only the reputation of the Bank’s executives but also that of its employees. Some of the employees also lost their jobs following the revelations of ethical misconduct. Finally, the inquiry was necessitated by the Bank’s failure to adhere to industry regulations. Therefore the scandal had a pervasive impact on the bank’s shareholders.

Recommendations for Financial Advice

While enough laws were already available in Australia during the occurrence of this misconduct, it cannot be argued that lack of regulations was the cause of the unethical conduct. Simply, the Banks misconduct was caused by the greed of the bank’s executives. This is true because the industry already has codes of conduct, relevant laws, and guidelines (Denniss, 2019).  

The recommendations in the final report have specified the responsibilities of each party involved in the sector. Also, they have also specified the various actions to be taken including fines in case of non-adherence. With these the new requirements, it is likely that ethical misconduct will be addressed.  

They encourage financial transparency. Transparency is the presentation of documented information written in a common and understandable language .Stakeholders and investors can receive accurate information and use them for decision making. Accounting and reporting also help in enhancing financial disclosures. Companies are required to publish information which is truthful and accurate with obligations, transactions and off-balance sheet liabilities. They help solve Real-time issues through disclosure of information during critical situations. Since issues in business affect the investors value companies must provide with the right information to be acted upon .Corporate governance is also another way in which accounting helps in fostering ethical business conduct. This is the relationship the company has with the society or its shareholders.

In conclusion, the recent revelation sin to the misconduct in the Australian banking, financial services, and superannuation sector points towards an industrial rot that has been in existent for decades. The impact of the misconduct of institutions in the industry was immense on various shareholders including customers, employees, regulators and the community. Following the revelations, the Australian Royal Commission came up with various recommendations aimed at addressing the mess in the sector. In these recommendations, the commission specified new requirements whose enforcement will lead adherence by the institutions in the sector

References

Denniss, R. (2019). It is greed that has led Australian banks to steal from dead people | Richard Denniss. [online] the Guardian. Available at: https://www.theguardian.com/commentisfree/2018/oct/03/it-is-greed-that-has-led-australian-banks-to-steal-from-dead-people [Accessed 31 Mar. 2019].

Eyers, J. and Shapiro, J. (2019). Commonwealth Bank hit with $1b capital charge after scathing APRA report. [online] Australian Financial Review. Available at: https://www.afr.com/business/banking-and-finance/commonwealth-bank-hit-with-1b-capital-charge-after-scathing-apra-report-20180430-h0zg14 [Accessed 31 Mar. 2019].

Financialreview (2019). Banking royal commission final report: Key recommendations. [online] Australian Financial Review. Available at: https://www.afr.com/business/banking-and-finance/banking-royal-commission-key-recommendations-20190203-h1at2v [Accessed 31 Mar. 2019].

Mao, F. (2019). The Australian bank customers who lost everything. [online] BBC News. Available at: https://www.bbc.com/news/world-australia-44478508 [Accessed 31 Mar. 2019].

Seeto, T. (2019). Banking Royal Commission Key Recommendations in a Nutshell | Canstar. [online] Canstar.com.au. Available at: https://www.canstar.com.au/home-loans/banking-royal-commission-recommendations/ [Accessed 31 Mar. 2019].