The financial services industry plays an essential role in the lives of Australians, from providing for day-to-day transactions to providing for a comfortable retirement.
Markets were opened because with increased competition can come benefits for consumers. At the heart of these open markets is a profit motive that, when properly aligned, drives companies and their staff to innovate, improve quality and place downward pressure on costs. The payoff is meant to be mutually beneficial to businesses and consumers. In return businesses gain new customers and increase their profits, while consumers get better quality products at lower prices.
However, the Royal Commission highlighted that there is a deep problem in how financial institutions are operating. For too many financial firms it has been easier to increase profit by misleading, confusing or selling products to people that are simply inappropriate or are harmful. This has resulted in widespread consumer harm.
In our joint comment with Financial Rights Legal Centre, CHOICE and Super Consumers Australia on the consultation on remuneration requirements for all APRA-regulated entities, we welcome APRA’s proposed changed to remuneration requirements and view them as an important step forward. It is time to make markets work properly and restore the missing link between the pursuit of profit and good consumer outcomes.
We feel that:
- The Design and Distribution Obligations must guide remuneration decisions;
- All sales-based bonuses should be prohibited;
- It is time to move beyond Net Promoter Score as a measure of good consumer outcomes;
- Balanced scorecards should use performance evaluation and not be tied to sales;
- Bonuses must not be paid when a company has had a significant breach; and
- Transparency and accountability must be the foundation upon which remuneration systems are built.