Justified Royal Commission or brutal payback?
Federal Opposition leader, Bill Shorten, has declared that a Labor victory will bring forth a Royal Commission into the banks but the reality is that all sections of the financial services industry will be in the spotlight.
There are still many days to go before Australians go to the polls on 2 July, but it seems one thing is certain — an Australian Labor Party (ALP) victory will bring with it a Royal Commission into the financial services industry.
This much was made clear by the Federal Opposition leader, Bill Shorten, during the second leader's debate on Sunday, 29 May. He said that while the Government would be delivering corporate tax cuts to the big banks, the Opposition was intent on delivering a Royal Commission.
But what needs to be understood about the ALP's Royal Commission agenda is that it represents the Opposition's counter-punch to the Abbott Government's Royal Commission into the Trade Union movement, and it will extend well beyond the activities of the banks.
Indeed, the chief executives of virtually all of the major financial services organisations would do well to reflect that the calls for a Royal Commission grew out of the industry funds movement which were, in turn, fuelled by the media's pursuit of claims of wrong-doing at Commonwealth Financial Planning, Macquarie Bank, National Australia Bank, IOOF and ANZ.
They would also do well to apprise themselves of the manner in which key members of the Senate Standing Committee on Economics utilised its Scrutiny of Financial Advice inquiry to pursue the major banks and to use its public hearings to carpet the likes of Commonwealth Bank chief executive, Ian Narev, and IOOF managing director, Chris Kelaher.
The activities of the Senate Committee provided a significant platform for whistle-blowers and critics of financial services to state their case and flesh out the issues which had been traversed by a myriad of media reports.
In point of fact, the powers of the Senate Committee do not fall all that far short of those of a Royal Commission, but that is not the point. There is a living agenda within the trade union movement, the industry funds movement and the ALP for a Royal Commission and Shorten has signalled strongly that he is happy to deliver to his constituency.
It ought to go without saying that the terms of reference for such a Royal Commission would see it raking over the coals of the issues impacting Commonwealth Financial Planning, CommInsure, Macquarie, NAB and ANZ. But the terms of reference would not stop there. The financial planning industry would again, and inevitably, be a target and the question of adviser remuneration an inevitable talking point.
It should follow from all of the above, that the few remaining commissions-based arrangements such as those applying to life/risk sales would also be in question, irrespective of the negotiations which gave rise to the Life Insurance Framework (LIF).
The problem for those arguing against the need for a Royal Commission is that there is no less current evidence of wrongdoing in the financial services industry than there was with respect to wrongdoing by the trade union movement in the years leading up to the 2013 Federal Election victory.
Former Prime Minister, Tony Abbott, went to the 2013 Federal Election making it clear he had the unions in his sights. Bill Shorten, who once held the financial services portfolio, is sending a similar message about the banks.
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