As you would likely have heard the Royal Commission’s final report was recently released.

This article summarises the Commission’s findings as they relate to client focused issues in Financial Advice and considers what APC’s approach to each is.

Australian Private Capital (APC) has adopted practices for many years that reflect the intentions of the Royal Commission.  Broadly this is that Financial Advisers should act in the best interest of their client and that there should be preferably no conflict of interest and if there is a conflict it should be adequately managed.  Whilst many in the Financial Advice space are anxious about the future, APC has no such concerns.  

We believe as the Government implements the findings of the Commission and ‘vested interests’ vocalise their worries, it will only serve to highlight the benefits of choosing a firm such as APC.

Recommendation – Annual renewal and payment

This recommendation is primarily focused on the issue of clients paying fees for services they have not received.  The Commission recommends that fee arrangements aref renewed annually and services that the client should receive are clearly explained.

As a client of APC you will have signed a Private Client Services Agreement which clearly outlined the services we will provide you.  We conduct our Regular Planning Meetings every six months where we clearly outline and re-confirm what your Private Client Service fee arrangement is and annually we provide a Financial Disclosure Statement which confirms the fee paid and the services delivered.

We also re-confirm your Private Client Fee arrangement whenever we provide new written advice to you.  So we have a focus on ensuring clarity around fees, charges and services provided.

Recommendation – Disclosure of lack of Independence 

A substantial theme of the Royal Commission is to better manage conflicts of interest.  This recommendation provides for specific written disclosure where an Adviser receives conflicted remuneration or where any conflict exists that may influence their recommendation.

APC is not remunerated by commission payments and has no conflicts that influence our advice to our clients.

Recommendation – Grandfathered income

The Commission recommends the removal of all grandfathered income which under current legislation is allowed. Grandfathered income is trail commission paid to financial advisers from products that have been in place prior to 1 July 2013. The commission believes that this provision potentially locks clients into old higher fee paying products.

APC introduced our Private Client Service Agreements many years ago and as a result we have very few clients who fall under this category which represents less than 1.5% of our business income.  However in July 2018, prior to the Royal Commission discussing this issue, we commenced a project to assist these clients to access the relevant advice they need.  We would expect that by June 30 this year this project will be complete with all grandfathered income removed.

Recommendation – Life Risk Insurance Commissions

The Commission broadly considers that exemptions to laws should be eliminated in general, but specifically in relation to conflicted remuneration. However, it recognises that the current Life Insurance Framework has only been in place since 1 January 2018 and that ASIC is due to review it after three years. The Commission believes ASIC should be allowed to complete its review in 2021 and that no further changes to life insurance be made until this occurs.

APC is not remunerated by commission payments.  Our firm’s position on this issue has been ‘ahead of the curve’ for many years having identified this clear conflict.  Our view is simple….Commission payments have no place in professional advice.

Recommendation – Mortgage Broker Commissions

Broadly the Commission is of the view that banks paying mortgage brokers a commission to place debt products for their clients is a structural conflict of interest.  Its recommendation is the removal of such payments so that the obligation of payment rests with the client.  In this scenario the client can be 100% confident that the Mortgage Broker is representing their best interest as the bank no longer is paying the Mortgage Broker a commission.

APC completely agrees with this approach.  Since we commenced offering debt facilitation services approximately 10 years ago we have adopted the approach that all commission payments received were to be returned to our clients 100%.   This serves to lower cost as well as to remove the conflict of interest which is the outcome the Commission is seeking to achieve.

However representatives of the Mortgage Broking industry are lobbying hard in Canberra and both the Government and the Opposition seem to be moving away from the Commission’s recommendation.   Irrespective of this outcome, clients of APC will continue to receive conflict free, lower cost debt implementation.

Recommendation – Reporting Compliance Concerns

All Australian Financial Services Licence (AFSL) holders should be required, as a condition of their licence, to report ‘serious compliance concerns’ about individual financial advisers to the Australian Securities and Investments Commission (ASIC) on a quarterly basis.  This recommendation seeks to formalise and improve existing breach reporting by AFSL holders to ASIC where there are serious compliance concerns about an adviser.

Australian Private Capital has held an Australian Financial Services License (AFSL), since March 1989.  Over that time the firm has always held the view that ‘our license is our business’ and considered the compliant operation of our firm and the integrity of the advisers within our firm to be of paramount importance.  Very few small advisory firms have a Practice Manager however APC has had one since 2002. This is an indication of the seriousness with which compliance is held at APC. 

Recommendation – Remuneration of Front Line Staff 

The Commission devotes a significant part of its final report to discussing the role of remuneration in driving behaviour in financial services entities. This recommendation is aimed at ensuring remuneration structures do not incentivise misconduct. The report references examples of limiting the proportion of remuneration that is variable and linking it to genuine non-financial metrics.

APC measures the performance of all staff using the well-established 360 Balanced Scorecard methodology.  It is used by many large companies but very few small ones.  No staff member of APC has any financial metric on their personal balanced scorecard.  Staff performance is measured by an assessment against their position description and client satisfaction measurements such as our client survey.  All our staff are salaried and are entitled to receive a Short Term and Long Term reward.


The Royal Commission was clearly required to shine needed light on some very poor behaviour.  However, it has served to validate that decisions APC has made over nearly 30 years of providing advisory services to our clients.

APC’s ‘Client First’ philosophy demands that our client’s best interest is at the forefront of all the advice we provide. 

Integrity and honesty are guiding principles that are reflected not only in our client relationships but also our co-worker relationships as well.

We have a sincere interest in helping our clients achieve better outcomes for them and their families and we understand trust is a required ingredient for developing long term relationships.

It is the reason why still today over 80% of our new clients are referred to us by existing clients.

If there is anything in this article that you would like to discuss we would encourage you to make contact with your APC Advice Team. We are happy to assist in any way.