A Royal Commission into financial institutions and the big four banks has revealed scandalous findings this week and are now under scrutiny.
Federal Treasurer, Scott Morrison, said they charged people for services they didn’t provide, misleading the Australian Securities and Investments Commission.
Penalties for corporate misconduct attract fines of more than $200 million and possible jail time.
So far, AMP and the big 4 banks are paying out a combined $119 million in refunds to more than 300,000 customers.
The “Fee no service” revelation saw banks admitting to charging customers after receiving no advice services, and passing it off as a mistake to ASIC.
AMP disclosed that it was a deliberate company policy.
“One thing about being consumers is that we rely on the industry being regulated and we rely on malpractice or questionable practice not being present,” said Ian Cook, global politics and policy lecturer at Murdoch University.
He said these revelations raised an issue of competency.
An advisor was hired before sitting a competency exam, and then failed the exam after already giving out financial advice…
“We’re not experts in this field, we rely on people who claim to be experts to do a job, to do it properly, and to do it ethically,” he said.
Mr Cook explained suspicions over how the banks and institutions have been so profitable; what they’ve been charing, and what services are they delivering.
“We’re starting to think the whole industry is tainted… There’s almost nobody, in terms of major institutions, that we can rely on to act ethically 100% of the time,” he said.
Despite public suspicions, the Government was resistant in doing this royal commission.
Mr Cook said there will be major political fall out after what has already been revealed.
He said if we hear more of this, questions for Scott Morrison and Malcolm Turnbull will arise, asking whether they were protecting anyone; how much they actually knew prior; and why the reluctance in holding the royal commission.
Elson Goh, Senior Finance Lecturer at Curtin University, said the industry needs to be self regulated, by holding those accountable, doing research and shopping around for the best service to suit your needs.
“Just with any form of service providers, I think that trust has to be earned, and people will have to understand that as consumers we are free to choose,” he said.
Mr Goh advises going back to your financial institution to gain clarification about what sort of fees and fee arrangements are present, then renegotiating if you are not satisfied.
Mr Cook said anyone with policies with any major corporation in this field should start thinking ‘If AMP was doing it, we were copping it as well?’
“It takes a fair bit of information to understand which banks to move to, and there are questions over what banks haven’t been engaging in these sorts of practices,”
Mr cook thinks people should wait to see what the royal commission comes up with, and base their going forwards on those findings.