On 29 November 2019, Australian Securities and Investments Commission (ASIC) deputy chair Karen Chester delivered a speech, 'Consumer outcomes: A truth universally acknowledged', at the Australian Institute of Company Directors Leaders' Lunch. Her speech outlined a change in ASIC's approach to consumer protection and offered many considerations for consumers, businesses and the broader community in financial services.
The speech drew upon the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission), previous studies conducted by ASIC and collaborations with other financial bodies.
The message was quite clear in that ASIC will not be lessening its involvement any time soon, but will be increasing its industry presence with a slightly different approach. Interestingly, the theme included various references to disclosure, but from the perspective of over-reliance, and confirmation that it does not excuse bad advice.
There were 75 case studies from the Royal Commission totalling approximately $790 million in remediation costs for more than 1.2 million consumers, driven by poor outcomes including credit insurance, add-on insurance, fees for no service and deficiencies in financial advice.
Four lines of defence were referenced in the deputy chair's speech, namely:
- public policy
- the consumer
- firms and their directors
- the regulator.
All of these elements were seen to be playing a part in the delivery of fair outcomes to consumers. This paper examines the pertinent points of the speech in relation to providing advice, and offers some guidance on what can be done to ensure obligations are met.
The first point addressed was the exceptionalism identified in the financial services industry by commissioner Kenneth Hayne. It was argued that it had drowned out the consumer voice. It is ironical that the very people it is meant to serve are the ones who suffer most, and the different treatment of institutions and some representatives of the financial services industry became somewhat normalised in Hayne's view.
The process of rebuilding will take some time. However, as we move towards a new normal, hopefully the industry and its professionals will seize the opportunity with both hands and become heavily involved in a change for the better.
The second point mentioned regarding public policy was disclosure.