FINSIA has made four submissions on behalf of members over the past two months after detailed analysis by industry councils.
Working groups from the Retail and Business Banking Council, and the Financial Advice and Services Industry Council were set up to examine:
Treasury’s Financial Accountability Regime Bill 2021
The Financial Services Council Green Paper on Affordable and Accessible Advice
The Australian Banking Association’s 2021 Independent Review of Banking Code of Practice
CEO and managing director Chris Whitehead Chartered Banker F FIN said: “Being able to make submissions such as these is part of the unique role FINSIA has as a connector between all stakeholders - finance professionals, industry, industry bodies and government.
“Everyone at FINSIA is keen to support the banking and the broader financial services industry’s commitment to raise standards of professionalism and earn back trust to create an enduring customer focused culture.
“That’s why it is so important that we continue to advocate on behalf of our members to ensure the voice of the individual is heard. So I am grateful to the members who put in their time and hard work to ensure FINSIA’s collective voice is heard.”
Head of Corporate Affairs John Pender added: “It is certainly worth reading the detailed submissions, but we’ve highlighted some of the remarks and suggestions made by the councils who have been working on them over the past months.”
With regard to the Independent Banking Code Review, FINSIA “suggests that the Code is currently driving an over-reliance upon compliance to rigidly prescribed rules and this is undesirable because it has been shown to diminish self-accountability.
“A prescriptive approach can never anticipate every circumstance.
“Frequently the cause of customer harm and dissatisfaction is the application of rigid policies when the application of professional judgement is needed.
“Since 60% of breaches are caused by human error, a significant reduction is best achieved by focussing on ensuring staff are competent and empowered, and held accountable, to do what is best for their customer.”
“FINSIA suggests this could best be achieved by ensuring banks expect all staff to agree to appropriate Professional Standards creating expectations on the individual, better defining what competencies are required - including of executive and middle management and a requirement for education in ethics.”
Given that individual accountability is at the centre of professional standards, the Financial Accountability Regime Bill 2021 is certainly supported by FINSIA.
The submission to Treasury stated professionals “should be held accountable for their actions and those of their firm, within functions where they hold the primary executive authority.
“Developing and maintaining the essential competencies for finance professionals together with a professional code of conduct is FINSIA’s purpose.
“From our engagements and consultation with leading professional associations in the UK, initial reviews of the effectiveness of similar regimes by the FCA and PRA conclude that the SM&CR is having a positive culture change in firms.
“Consideration should also be given to the establishment of industry-wide standards of competency and conduct specifically for executives to ensure consistency across organisations.
“The FAR Bill has the potential to support professionalism and professional standards in the financial services industry, and good outcomes for the community.
“While the Bill rightly puts the obligation on the entity to ensure the accountable person is suitable, FINSIA believes the current draft bill allows too much room for a lack of proper process for that declaration and the risk that entities may nominate persons who are not suitable through want of a proper objective process.”
On the Single Disciplinary Body Response, the submission states: “FINSIA supports a practical and appropriate balance in the matters which should be referred to the Financial Services and Credit Panel to allow the FSCP’s decisions, as intended by the Royal Commission, to demonstrate what conduct is or is not unacceptable.
“This includes the better defining of notions of “serious” and “repeated” and not confusing processes and outcomes by including suitability of persons to provide financial advice.”
The Affordable and Accessible Advice submission again referenced FINSIA’s belief in a move away from over compliance.
“FINSIA suggests that the UK approach and model should be considered where:
• Regulator authorises professional bodies.
• Professional bodies issue practising certificates of capability.
“FINSIA encourages the FSC to consider this model – and to understand the role of professional bodies and practitioners.
“We agree the financial advice industry needs to move away from an overly compliance-based approach to a more principle-based model focusing on professionalism, however the Green Paper lacks detail in this regard.
“The FSC should provide more detail on the mechanisms of professionalism.
"How is it going to ensure professionalism is entrenched across the financial advice industry to the benefit of consumers?
“The UK model essentially revolves around the regulation requirements of education.
“Just like the UK model, some form of education and ethical component should be standardised across professional bodies to avoid arbitrage.
“There are some complexities to be determined – understanding who delivers the education, what framework it aligns to, and the efficiencies in delivering it.
“There are also numerous advantages of having the membership model responsible for the discipline - there is no financing for the discipline and the fees you pay to be a member will provide all the infrastructure for the disciplinary body. In addition, you are disciplined by your peers. It is positive from an efficiency, cost benefit and from a relationship basis.”
