Stuart Robert MP, Assistant Treasurer, made the comments in his opening speech at the Finance Brokers Association of Australia (FBAA) National Industry Conference, Evolution, on Friday morning (16 November).
Mr Robert outlined that the finance and broking industry was going through a period of upheaval and change that would likely continue into the near future.
The Assistant Treasurer provided an overview on the changes and inquiries taking place in the finance industry, ranging from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, to the Productivity Commission’s report on competition in the Australian financial system, open banking, comprehensive credit reporting and regulatory inquiries.
Mr Robert said: “The coming months will be important for the future and direction of your industry.”
Noting that the royal commission was expected to hand its final report to government by 1 February, Mr Robert said that while the royal commission’s interim report has not made any recommendations at this stage and that it was “too early to speculate on what the government may or may not do,” suggesting that reform would likely focus on cultural change, rather than regulatory change.
“There is a clear opportunity for the financial services industry, including finance brokers, to use the royal commission as a catalyst for continual change and change of culture,” the Assistant Treasurer said.
“Cultural change is caught, it is not taught... change starts at the very top. The government established the royal commission to ensure that Australia’s financial system continues to work efficiently, effectively and in the best interest of everyday Australians.”
The Assistant Treasurer outlined that Commissioner Hayne had set out a number of overarching issues that have emerged during the commission’s hearings, such as the belief that “financial institutions were putting short-term pursuits of profits ahead of their duties they owed to customers and ahead of the basic standards of honesty and fair dealing”. He said that the Commissioner identified a “sales culture rather than a culture driven by good customer service, which is driven by remuneration or incentive structure at all levels”.
Mr Robert continued: “He [Commissioner Hayne] made the point that more law is not necessarily the answer. More often than not, the misconduct was contrary to existing law.
“He also made the point that the complexity of the law actually may be a part of the problem and simplification of existing laws may well be part of the solution.”
The Assistant Treasurer concluded: “Your industry has changed continuously over the past 25 years due to tech, regulation and consumer behaviour. It will continue to do so. The next 12 months will be no different.
“[In] the coming months, we’ll consider the royal commission recommendations together with those put forward by the Productivity Commission.
“[These are] two major lines of inquiry that I suggest will usher in a new wave of reform, mostly led by cultural change rather than regulatory change.”
The federal minister said that the government was “doubling down on [its] commitment to improve consumer outcomes by increasing competition in [the] sector, most notably about starting a new chapter in open banking, fuelled by data-driven innovation”.
“I think this will take your industry into some unknown waters with an enormous opportunity for the entrepreneur among you,” the federal minister said, adding: “There has never been a more interesting, exciting and opportunity-rich time to be in your industry.”
Mr Robert told brokers: “There is an opportunity for your industry to consider what changes may be necessary or opportune or how [you can] further improve the services you offer.
“There has never been more opportunity for an industry than [in] yours now. Sometimes the opportunity can be difficult to see, but it is certainly there. There is a fair bit of change coming... There are many dynamics of change that your industry needs to factor in.
“But at least you have made the right decision today. You’ve turned up to engage in this process of change.”
The Assistant Treasurer said that he “welcome[s] [broker] input as [Treasury] consider[s] not just the response to the Productivity Commission but working into the royal commission”.
Speaking following Mr Robert’s address, Peter White, managing director of the FBAA, said that he believed the Assistant Treasurer’s comments were “very, very positive”.
Mr White added that the minister’s address suggested that the government wasn’t focusing its sights on regulatory change but cultural change.
Mr White said: “Yes, there is going to be a bit of change, that is the way life is… But are you going to lose your trail commissions? No. Are they going to have problems with the upfront? No.”
Adding that there is going to be “tweaking” and could possibly include “some more tweaking” in the future, Mr White said that it was “not going to be the end of the world”.
Noting that the theme of the conference was “evolution”, Mr White said that “those who are most adaptable to change will be the ones that survive into the future”.
“That is what we’re about,” Mr White said.