How to han­dle Hayne’s changes

An­thony Keane ex­plains why you should pay at­ten­tion to the bank­ing royal com­mis­sion out­comes

The Daily Telegraph (Sydney) - - Money Saver -

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.

COM­MIS­SIONER KEN­NETH HAYNE

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.