This has resulted in evidence of egregious behaviour that looks to have fallen short of community expectations. A further debate is just beginning to assess standards of behaviour in a rapidly changing world, and to decide who is best positioned arbitrate on such matters. None-the-less evidence of breaches of the law, and a disregard for the authority of the regulator have been forthcoming. As many commentators have observed, recurring industry weaknesses and wide spread issues exposed through the Royal Commission are largely known. Many have been recalled from the files of the regulator themselves.
The question then becomes one of identifying the root cause, a responsibility that Commissioner Hayne and his supporting legal counsel have proven to be adept at forensically dissecting and identifying. Bank efforts to transform going forward will be aimed at moving away from not only doing what’s legal, but doing what’s right. Technology will play a significant role in simplifying the new business model, where the customer comes first, compliance issues can be prevented and once identified remedied quickly.
A conclusion has formed that the law supporting consumer rights regarding financial services products is overly complex, provides to many loopholes that can, and have, been exploited to the benefit of the product manufacturer and at times, at the expense of the consumer. The regulator looks to have not taken a strong enough stance against perpetrators when laws have proven not been followed. This reconciliatory approach based on remediation has served Australia well in many facets of our overall governance, however this approach has often taken too long to remedy situations once identified and penalties seem to not have been hard enough to dissuade further industry breaches.
A series of recommendations that the laws protecting consumer rights in relation to financial products needs to be simplified, whilst in parallel more effort is required to raise the financial literacy of consumers. This responsibility needs to fall on the industry itself.
In parallel the capacity of the regulator, both ASIC and APRA, needs to be strengthened to ensure that the law is complied with. An ethically aligned senior role is required, with a broad remit to operate within a financial services provider to ensure the path back to consistently doing the right thing is adopted.
In the information age organisations must chart this path towards becoming an organisation based on a clear and defined set of values that prioritise doing the right thing, implemented with an empowered workforce focussed on supporting customers whilst balancing the interest of shareholders. Mechanisms that work against this first principles are to be dismantled, including sales based incentives that work against the interests of the customer.
Going forward, getting a mortgage will be different, brokers will have less influence and a less conflicted remuneration model that focusses on the best interests of the client. Getting financial advice will be different, providers will need stronger credentials. However, banks will continue to do what they do best, manage risk to their portfolio, whilst ensuring the availability of credit.