Did the RC miss the mark?
More research has emerged confirming financial planners and mortgage brokers rather than the major banks and product manufacturers have emerged worse off from the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
A Roy Morgan Research analysis has confirmed that it is the financial services intermediaries who are being most negatively impacted.
It said that financial planners and mortgage brokers currently account or the distribution of 35 per cent of the total value of the major financial products and that this covered the combined value of home loans, superannuation, life/risk insurance and managed funds.
“A number of the recommendations of the Royal Commission relate to mortgage brokers and financial planners and, if adopted, are likely to negatively impact their usage, particularly as it relates to borrowers rather than lenders paying fees,” the research analysis said.
The Roy Morgan analysis provided a chart revealing how consumers obtained financial products and noted that the use of intermediaries was not the same for all major financial product groups, with the high level being for managed investments with 56 per cent being owed to the use of financial planners.
It said that for superannuation, employers played the major role and accounted for 60 per cent of the market, with intermediaries accounting for 32 per cent with this being mainly due to the default fund being the major fund chosen.
The research revealed that in the case of life/risk the main channel used was by going direct to the company (40 per cent) followed by employers (27 per cent) and intermediaries (24 per cent).
Commenting on the research results, Roy Morgan industry communications director, Norman Morris said a lot of the issues raised in the Royal Commission were as a result of how bank customers purchased their product and the extent to which their needs were understood and taken into account.
“Many of the problems reported were a result of consumers having insufficient financial literacy skills for the product they were purchasing and who were obtaining it through a channel not designed to focus on their best interests,” he said.
“This research shows how significant the intermediaries are in the purchasing decisions of the major financial products and as a result there is a need to understand who they are and how they are remunerated,” Morris said.
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