Forcing big banks to sell off their financial planning businesses should be under serious consideration, according to former Australian Competition and Consumer Commission chairman Allan Fels, in the wake of explosive evidence heard by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The former competition chief told Fairfax Media that the deeper problem in the industry was the inherent conflict created by having the same bank both manufacture a product — like an insurance or superannuation product — and then also employ financial advisers to provide advice to customers on whether to buy such a product.
He said that it was clear the inherent conflicts of interest within bank-owned financial advice networks were unmanageable, resulting in poor customer outcomes.
“I believe the Royal Commission needs to look at structural separation as a possible remedy. This is usually far more effective than trying to regulate the behaviour of banks," he said.
The comments came after several days of scandalous evidence at the commission.
Australia's largest wealth manager AMP admitted that it had deliberately charged clients for services it had no intention of providing. In addition, all four big banks in the country had done the same. In particular, Australia's largest bank Commonwealth Bank of Australia (CBA) has charged more fees for no service than any other financial services entity in the country, counsel assisting the banking royal commission Mark Costello said. A CBA executive said that the bank lacked the systems to identify and monitor whether financial advice had been delivered.
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