In a statement on Thursday the ABA said: “We will immediately establish an independent review of product sales commissions and product based payments with a view to removing or changing them where they could lead to poor customer outcomes.
“We intend to strengthen the alignment of remuneration and incentives and customer outcomes. We will work with regulators to implement changes and, where necessary, seek regulatory approval and legislative reform.”
The ABA’s announcement came a day after the government said it planned to strengthen the powers of the industry’s main regulator, the Australian Securities and Investments Commission (ASIC), boost its budget by A$127.2m (£69.1m, $99.3m) and extend the term of its chairman Greg Medcraft by 18 months.
Industry fightback
The move on commissions forms part of package of measures announced by the ABA whose members have come under intense pressure to improve performance after a series of financial scandals. And amid mounting criticism by politicians and the media about poor customer service, particularly for investment advice and the sale of insurance products.
There has also been a wave of government inquiries, reviews and consultations undertaken over recent years highlighting the industry’s poor practices, which have led to calls for a full scale Royal Commission into the whole sector.
Apart from the review of fees and commissions, the ABA’s proposed fightback plan will include enhancements to existing complaints handling processes with the establishment of an independent customer advocate in each bank; greater protection for whistleblowers in the industry; and support for a broadening of external dispute resolution schemes, including the Financial Ombudsman Service.
In addition the banks will expand their existing industry register of rogue financial advisers to include any bank employees guilty of poor conduct, including customer facing and non-customer facing staff.
“This will help prevent the recruitment of individuals who have breached the law or codes of conduct,” the ABA said.
Addressing concerns
ABA chief executive Steven Münchenberg said: “This package aims to address consumer concerns about remuneration, the protection of whistleblowers, the handling of customer complaints and dealing with poor conduct.
“Banks recognise the importance of the community discussion about the delivery of banking and financial services, and are pleased to put forward this plan,” Münchenberg said.
The ABA will also support legislation is currently before the Australian parliament to halve the level of commissions for the sale of life insurance.
