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Banks expected amendments to financial advice law

Banks expected amendments to financial advice law
So unprepared are Australia's banks for the provisions of a new financial advice law that they haven't implemented training and compliance systems for the changes.

The law came into effect in mid 2012. Some changes became mandatory in mid 2013 and others will become mandatory in July.

Giving evidence to a Senate committee looking into government plans to water down some of the provisions, an executive with the Australian Bankers Association, Diane Tate, said banks were not ready because they had expected the government's planned amendments to pass.

Greens senator Peter Whish-Wilson asked Ms Tate: "Did you have the expectation that this government would deliver for you in terms of changing the legislation?''

She replied: "The question mark that we have is that if we don't have certainty before the first of July, that the way that [it] will operate will have the change."

Senator Whish-Wilson: "One thing I know corporations are really good at doing is managing risk, they are always forward-looking and they are always incorporating these things into their decision making. You haven't changed your compliance because you obviously have an expectation that these laws are going to [be] changed for you."

Ms Tate: "We do have an expectation because we had bipartisan support prior to the last election that these things would happen. If they don't happen, fast changes will have to be made. We had spoken to the former government and the current government is on record."

Senator Whish-Wilson: "OK but they don't control the Senate. The law is the law and it hasn't been changed."

Ms Tate: "Banks are not going to be non-compliant, but what is going to have to happen in the next little while, if we don't have certainty before the first of July, they will have to expedite changes to their compliance systems."

From July, bank tellers will be prevented from receiving commissions for recommending financial products. The amendments proposed by the government would allow commissions in limited circumstances.

They were announced late last year by the former assistant treasurer Arthur Sinodinos but were put on hold when he stepped aside in March. Senator Sinodinos was an executive at the National Australia Bank before joining the Senate in late 2011.

His successor, Senator Mathias Cormann, wants to introduce the changes in June.

None of the big four banks fronted Thursday's Senate hearing, although the Commonwealth Bank and Westpac had made submissions. Commission-driven sales at the Commonwealth Bank were the subject of a Four Corners program titled "Banking Bad", broadcast by the ABC on May 6.

Ms Tate said, as it stood, the financial advice law would prevent bank tellers from dealing with inquiries about investment products, meaning customers would need to repeatedly "take another ticket and go to the back of the queue" if they had complex inquiries. The changes proposed by the Coalition would allow tellers to offer limited advice in return for limited commissions.

The Financial Planning Association and the Institute of Chartered Accountants opposed the changes.

If a commission is bad for personal advice it is bad for general advice,"; the Association's Chair Matthew Rowe told the inquiry. If something is evil, it is evil. We banned commissions in 2009.

The Association represents independent financial planners who do not work for banks.

Author : Peter Martin
Source : Sydney Morning Herald
Last modified onFriday, 23 May 2014 00:28

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