NKP View - Royal Commission

Recommendation

Our response

Recommendation 2.1

All ongoing fee arrangements:

• Must be renewed annually by the client
• Must record in writing each year the services that the client will be entitled to and total of fees to be charged
• May neither permit nor require payment of fees from any account held for on behalf of the client except on the client’s express written authority

Newcombe Kritsimas Partners already follows these recommendations. We do not expect any significant change here. We have been a fee for service business for well over 20 years and do not take fees without your consent.

The only change we envisage is that there may be more documentation around this which you will need to sign off each year.

Recommendation 2.2

Provide a written statement explaining why the adviser is not independent, impartial and unbiased

No change. We have never hidden the fact that our business is a franchise under the Godfrey Pembroke licence. Godfrey Pembroke is owned by MLC which is owned by NAB. NAB have already committed to selling MLC within the next 12 months.

We only provide advice and recommendations that are in your best interest. It is the foundation with which this business was built upon and this will not change in the future. We will only ever operate under a licensee that can provide us with solid outcomes such as quality research, technical and compliance support to ensure we have the necessary tools to provide you with a solution to meet your goals and objectives. We will never operate under a licence that forces us to push their products.

Recommendation 2.3

Review measures made to improve the quality of advice in three years’ time.

We are in for the long haul and welcome any measures that improve the standards and quality of advice in our industry.

Recommendation 2.4

Grandfathered commissions should be repealed as soon as reasonable practicable

We are very comfortable with this. We have always said that commission provided by a product provider puts us at risk of a conflict of interest. Having been fee for service for over 20 years – we have been well ahead of the industry on this one.

Recommendations 2.5

ASIC should consider reducing the cap on commissions in respect of life insurance products or it should ultimately reduce to zero.

We don’t agree with this entirely. Although we don’t agree with commissions in general – all providers currently have to pay the same percentage level of commission to advisers, so it is a level playing field. In a lot of cases – this is the only way a person can afford to access insurance whilst remunerating their adviser. Most Australians are vastly underinsured and if clients have to pay a fee personally, it is likely to discourage them from seeking insurance.

Recommendation 2.6

Consider whether the exemption on conflicted remuneration on general insurance and consumer credit insurance remains.

Not applicable to our business

Recommendation 2.7

Licence holders to implement reference checking and information sharing protocols on financial advisers

We agree with this one strongly. Advisers are entrusted with the life savings of many Australians. Clients should feel safe in knowing their adviser has been fully checked and does not have a chequered history.

Recommendation 2.8

All Licence holders should be required to report serious compliance concerns about individual advisers to ASIC on a quarterly basis

Another one we agree with. Any serious compliance concerns need to be reported in a timely manner so that ASIC can investigate and rectify and serious compliance breaches.

Recommendation 2.9

Where an adviser has engaged in misconduct in respect of advice given to a client (by giving inappropriate advice or otherwise), the licence holder should:

• Make the necessary inquiries to determine the nature and full extent of the advisers conduct
• Where there is sufficient information to suggest misconduct – tell all affected clients and remediate those clients promptly

Strongly agree with this. Clients should not suffer for the misconduct of their adviser. Remediation should have a satisfactory outcome for a client, the process should be quick and limit client stress as much as possible.

Recommendation 2.10

New disciplinary system to be established for financial advisers that:

• Requires all advisers who provide financial advice to clients to be registered
• Provide for a single, central, disciplinary body
• Allow clients to report information about the conduct of advisers to the disciplinary body

We would welcome a new system. A single disciplinary system should help to enforce the new rules laid out and improve the compliance standards of our industry.