Day 406: 'Couldn't have picked a more challenging time'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 406.
Today in summary: AMP shares have dropped again amid compensation payouts; ASIC says financial audit standards are improving but still not good enough; and the RBA is expected to lower its growth forecasts for 2019 and 2020, but remains chipper.
-- Alex
Current banker panic level: 😓😅
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1. AMP shares have tanked after the wealth management firm warned its full-year profit could take a big dive from 2017. Among the hardest hit by the Hayne royal commission, AMP has busily been settling a string of customer compensation payouts after allegations of “fees for no service” were unearthed on its corporate superannuation division, which it has since sold. The Australian Financial Review reports that investors voting out AMP chairman David Murray after less than a year, while an aggressive move, is not off the table.
2. Regulator ASIC has handed down its report from a probe into Australia’s six largest audit firms, revealing auditors did not obtain “reasonable assurance” that the 2017-18 financial reports of 215 listed and other public interest entities were free of errors in 20% of key areas.
“The overall level of findings still suggests that further work and, in some cases, new or revised strategies, are needed to improve quality.”
3. The RBA is expected to lower its growth forecasts for 2019 and 2020, following a downgraded economic outlook in 2018, but is still cheerier about the economy than everyone else. The Australian’s James Glynn reports:
“Don’t expect the RBA to dump its long-held upbeat narrative on the economy in favour of something more dovish. The long-held policy mantra has been that a tightening job market will eventually deliver higher wages and inflation, pushing interest rates higher, but not any time soon. Employment data for December will reassure the RBA that the underlying pulse of the economy continues to throb.”
Today’s burn prize: Australian Financial Complaints Authority CEO and Chief Ombudsman David Locke
🔥🔥🔥
“Free financial counselling and other community services play a very important role in the financial sector. Without these services, it is likely that many people would not know that they can turn to a free service like AFCA for help.”
AFCA, the single Ombudsman scheme for financial complaints, appeared at the Senate Inquiry into credit and financial services targeted at Australians at risk of financial hardship, and said if debt management firms were required to be members of AFCA, consumers who might have complaints against these firms would be given access to free and timely dispute resolution.
The Commentariat
The Australian’s senior banking reporter Joyce Moullakis writes that Westpac “couldn’t have picked a more challenging time” to assess whether to sell off its wealth arm or dig in and invest in robotic advisers. As the only major bank that has so far retained its scandal-prone financial planning division, Moullakis questions the wisdom in assessing this arm of the business as the Hayne recommendations approach, when ANZ, CBA and NAB have already cut and run.
“Westpac — the only major bank that has committed to retaining the lion’s share of its wealth business — had 803 salaried and aligned planners as at September 30. Any big shift into robo-advice would significantly reduce planner headcount.”
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