How to handle Hayne’s changes
Anthony Keane explains why you should pay attention to the banking royal commission outcomes
SAVERS, borrowers and investors need to take more interest in their own money matters following the banking royal commission’s scathing final report.
Recommendations to ban ongoing commissions and cut fees for financial advice, mortgage broking, insurance and superannuation have been widely welcomed, and will prevent rip-offs that have cost Australians hundreds of millions of dollars.
But they are also tipped to cause financial professionals to raise upfront fees or quit.
Whether it’s getting a home loan, buying cars, taking financial advice or signing up for life insurance, many sectors are impacted by Commissioner Kenneth Hayne’s final recommendations.
Financial research group Canstar says the most controversial recommendation, banning mortgage brokers’ commissions and making customers – rather than banks – pay brokers upfront, could lead to “quite an exodus”.
Canstar group executive of financial services Steve Mickenbecker said the 76 recommendations were good for consumers in many ways.
“It doesn’t tighten up on lending criteria more than we have seen,” he said. “That’s great news because the banks have already tightened up enough. The other major change is that borrowers, investors and super fund members can now get a higher level of confidence in the advice they’re receiving.
“One thing the royal commission has shown us all is that people who don’t take enough interest in their own finances end up getting a lesser deal than they should.”
Financial advisers – a target after big banks charged fees for no service and fees to dead people – have warned that advice could become more expensive once all trailing commissions are banned.
Lifespan Financial Planning chief executive Eugene Ardino predicted a dramatic rise in upfront fees and fewer people being able to afford advice.
“Upfront fees currently average $2000 to $4000,” he said. “Advisers are prepared to initially service clients at a massive loss because of the possibility of an ongoing relationship with the client on a retainer basis.
“If you consider a reasonable hourly rate to be $250-$400, then the real price for (detailed) advice ranges from about $6000 to $14,000.”
Other Hayne recommendations aim to prevent dodgy car finance by no longer making car dealers exempt from full lending laws, and putting a cap on car retailers’ add-on insurance offers.
People’s Choice Credit Union’s Stuart Symons said the changes would make it easier for consumers to make better car-financing decisions.