What can only be described as shocking stories have already emerged during Round 1 of the Banking Royal Commission.
The Banking Royal Commission has exposed banking practices in the mortgage industry, upselling of junk insurance policies and other behavior that fell well short of community standards and expectations. This has already resulted in the Australian Banking Association calling for any changes flowing from the commission to be “sober and measured”.
Round 2 of hearings started on 16th April 2018. Financial advisors are the focus. There have been numerous enquiries into financial advisors in recent years. There have also been changes to the law – with perhaps little measured difference to clients. Financial advisors are now required to act in a client’s “best interests”. ASIC reviewed the impact of the change of law in its report Financial advice: Vertically integrated institutions and conflicts of interest published in January 2018.
Despite the change in law, ASIC found that three quarters of the files it examined were non-compliant with the best interests duty. What’s worse, in 10% of those files, ASIC determined the client was actually “significantly worse off” as a result of the financial advice given to them.
Round 2 of the hearings will deal with inappropriate financial advice. It will also deal with clients being charged ongoing “fees for no service”. Given our experience in dealing with professional negligence claims against financial advisors, we have no doubt that the commission’s blowtorch will result in yet more shocking stories that have not been previously made public.
At the opening of the BRC, Rowena Orr (Counsel Assisting) said the following “Clients repose trust and confidence in their financial advisors. It is important that their trust and confidence is well placed”. We wait with interest to hear more stories over the coming week.
The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.
