Royal Commission doesn't seek structural separation in advice.
The final report from the banking royal commission has recommended against structural separation between providing financial advice and the manufacture or sale of financial products by a licensee.
Commissioner Kenneth Hayne, in the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, said enforced separation of product and advice would be a significant step to take.
To that end, Hayne pointed out the move would be expensive and disruptive.
“I am not persuaded that it is necessary to mandate structural separation between product and advice,” he said.
“I cannot say that the benefits of requiring separation would outweigh the costs and the Productivity Commission concluded that ‘forced structural separation is not likely to prove an effective regulatory response to competition concerns in the financial system’.”
In response to Hayne’s conclusion, SMSF Association chief executive John Maroney told selfmanagedsuper the report has taken a reasonable position on the matter and the association is supportive of the direction of the recommendation.
“It’s a key part of how the system is structured at the moment so we don’t see the need for that to be changed,” Maroney said.
“It seems to be a reasonably good outcome from the point of view of unsettling things unnecessarily.”
The report agreed with the Productivity Commission’s recommendation that beginning in 2019 the Australian Competition and Consumer Commission should carry out five-yearly market studies on the impacts of vertical and horizontal integration in the financial system.
It also recommended that the hawking of superannuation to be prohibited. It said unsolicited offer or sale of super should be prohibited except to those who are not retail clients and except for offers made under an eligible employee share scheme.
“The law should be amended to make clear that contact with a person during which one kind of product is offered is unsolicited unless the person attended the meeting, made or received the telephone call, or initiated the contact for the express purpose of inquiring about, discussing or entering into negotiations in relation to the offer of that kind of product,” it said.
Maroney said the anti-hawking provisions in the law are intended to protect consumers who are not financially sophisticated and observed most people entering into an SMSF are reasonably financially astute and seek advice from accountants and financial advisers.
“I don’t think it’s going to have much of an impact in the SMSF side and anything that would deter people from starting an SMSF when it is not in their best interest, we would support as a good consumer protection measure,” he said.
Commenting broadly on the report, he said he welcomed the fact the royal commission did not see the need for specific SMSF recommendations, and reiterated the Productivity Commission’s recommendations around professional SMSF advice and the need for specialisation for those wishing to provide SMSF advice.
“We hope that gets consideration by the government in due course,” he said.
By Malavika Santhebennur
Self Managed Super
4 February 2019