Royal Commission

<p><strong>EXPERT OBSERVER</strong></p>

<p>The most predictable thing in real estate is the outrage that emerges from some sections of the community whenever dwelling prices rise. Equally predictable is the willingness of mainstream media to indulge the disaffected few<br />
who think politicians and bureaucrats should be taking action to stop the markets doing what they naturally do.</p>

<p>There was considerable media coverage last week of a &ldquo;report&rdquo; from the University of New South Wales which called for &ldquo;the immediate creation of a Royal Commission&rdquo; because rising prices constitute a national crisis and young Aussies are &ldquo;locked out of the market&rdquo;.</p>

<p>One headline based on this report declared: &ldquo;House prices a time bomb ready to erupt in the absence of immediate intervention&rdquo;.</p>

<p>The lead author was someone smart enough to attain the title of &ldquo;professor&rdquo; but not clever enough to understand the dynamics of real estate markets.</p>

<p>Here&rsquo;s one quote that demonstrates how little the report author knows:</p>

<p>&ldquo;Rampant price growth has&nbsp;returned to the&nbsp;larger cities&nbsp;and is now&nbsp;spreading to&nbsp;regional Australia. This&nbsp;is&nbsp;in&nbsp;part&nbsp;due to the pandemic-fueled work-from-home revolution&nbsp;but&nbsp;is&nbsp;also because so many younger Australians can no longer afford the life they want as homeowners in the larger cities.&rdquo;</p>

<p>There are several errors in that one short paragraph, which would tend to destroy the credibility of the commentator:</p>

<p>1. Price growth did not start with the big cities and spread to the regions &ndash; it&rsquo;s been the opposite. The regions have been leading on price growth for some time, alongside some of the smaller cities - and the big cities, notably Melbourne, have belatedly joined the party.</p>

<p>2. The work-from-home revolution is not an outcome of the pandemic. It&rsquo;s been under way for several years and has been fueled by technology and people&rsquo;s desire for a better lifestyle. Sydney has been losing population to internal migration for the past decade and Melbourne for the past four years. This is one reason why regional markets have been leading on price growth. The pandemic has provided further impetus to this trend but it certainly did not create it.</p>

<p>3. The statement that young people can&rsquo;t afford to live in the big cities has been plucked by the professor out of his fundamental orifice. First-home buyers have been in the market in record numbers of the past 12 months, boosted by federal and state stimulus measures, and have been buying in Sydney and Melbourne as much as anywhere else. They have been leading the market and have been prime instigators of the price rises.</p>

<p>But, in one sense, having a major parliamentary inquiry would be a great idea because it&rsquo;s a sure way to ensure that nothing fundamental will change. Royal Commissions can take years to produce a report and will provide photo opportunities for politicians, but real action is unlikely to result. Watch a few episodes of Yes Minister to see how it works.</p>

<p>We&rsquo;ve had inquiries into the housing market in the past. The most recent federal parliamentary shallow dive into housing affordability spent quite some time giving the appearance of being serious about solving the affordability issue, before taking the easy way out by scapegoating an unpopular minority, foreign investors.</p>

<p>This gave governments a licence to slug overseas buyers with new taxes and charges, providing a new revenue source, while changing nothing that mattered. Affordability did not improve because foreign investors would never the problem. Nor are negatively-geared Australian investors, the other popular choice by the disaffected minority to shoulder the blame for rising property prices.</p>

<p>The reality is that we&rsquo;ve had exceptional price growth over the past year or so, without any major involvement from investors, who collectively have been sitting on the fence for the past three or so years. They&rsquo;re only now starting to come into the market.</p>

<p>Investors never lead market cycles &ndash; they react to them, as they are right now. Those calling for a Royal Commission into the housing market are essentially demanding an inquiry into human behaviour.</p>

<p>If people behaved sensibly and rationally - and did real research to develop real knowledge of real estate - we wouldn&rsquo;t have the nationwide market upheavals we have every 15 or 20 years, including right now. Prices are rising at extraordinary speed because most people are essentially herd animals. They&rsquo;re diving feverishly into the market because everyone else is, not because their actions make sense.</p>

<p>But it&rsquo;s not supposed to make sense, any more than the startling highs and lows of the share market make any real sense. The smart people were buying 9-12 months ago, well ahead of the current frenzy, because they were informed and could see what was coming.</p>

<p>But most just follow the pack and right now the herd is stampeding. Prices are rising rapidly, but for many of our major markets it&rsquo;s the first real growth they&rsquo;ve shown in 5-10 years. Perth and Darwin last had a market peak in 2013 and have been in decline ever since. Now, at last, those cities are delivering some value growth to the long-suffering majority who own their homes &ndash; but self-absorbed Sydney academics would like to rob them of their long-overdue time in the sun.</p>

<p>Similarly, cities like Brisbane and Adelaide have been stagnating for much of the past decade. It&rsquo;s not a crisis for home-owners, including those who had the foresight to buy recently, that values are at last showing some growth. The real crisis in the housing market, and the one that truly does need government action, is the chronic shortage of rental properties.</p>

<p>The solution to this problem is to encourage property investors to do what property investors essentially do, which is create a pool of homes available for rental. That means we want them to be out there buying properties in large numbers.</p>

<p>The New Zealand Government recently had a major brain explosion and essentially wiped investors out of the market by scrapping tax benefits. This compounded the earlier decision to ban foreign investors. The outcome has been a shortage of rental properties even worse than Australia&rsquo;s. Australia risks making the same mistakes, if the politicians listen to misinformed academics.</p>


Those calling for a Royal Commission into the housing market are essentially demanding an inquiry into human behaviour.

terryryder

Why we don't need a Royal Commission in to surging house prices: Hotspotting's Terry Ryder

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<p>Bank-owned superannuation funds are losing billions to industry funds a response of customers in response to their misbehavior that has been revealed at the banking royal commission.</p>
<p>AustralianSuper says it received more than $1 billion from new customers in each of July and August – double the amount of the same time last year.</p>
<p data-gtm-vis-first-on-screen-7770372_137="2971" data-gtm-vis-total-visible-time-7770372_137="4000" data-gtm-vis-has-fired-7770372_137="1">Chief investment officer Mark Delaney said the gains were due to transfers out of retail funds.</p>
<p>"We can see where the money is coming from," he told Fairfax Media. "It's money being rolled in and it's coming from retail providers."</p>
</div>
<div class="cq-article-content-media section">With more than $140 billion in funds under management, AustralianSuper is already the nation's largest super fund.</div>
<div class="cq-article-content-paras section">
<p>In the June quarter, the value of industry funds surpassed retail funds for the first time; the sectors hold $632 billion and $622 billion respectively.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900">It appears while industry super executives were called before the royal commission they emerged largely unscathed.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900">Hostplus was found to have fallen below community standards when it sought to keep low-balance members in the fund.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900">Hostplus had been riding a wave of popularity generated by author Scott Pape, better known as The Barefoot Investor.</p>
<p data-gtm-vis-first-on-screen-7770372_137="9010" data-gtm-vis-total-visible-time-7770372_137="1900"><span>The Hayne royal commission gave industry super funds a surprisingly "cursory" examination, says former union boss Paul Howes.</span></p>
<p>KPMG wealth chief and former union boss Paul Howes told Fairfax Media he was surprised at "the significant amount of time that was dedicated to retail funds versus quite a cursory amount of time on industry funds."</p>
<div class="cq-article-content-paras section">
<p>Howes said consolidation of industry funds was the most important issue faced by the super sector and yet the commission spent comparatively little time exploring it.</p>
<div id="article-inline-ad" class="adWrapper">"We have 238 APRA-regulated funds in a country of 25 million people," he said.</div>
</div>
<div class="cq-article-content-paras section">
<p>"It is insane, and it is an indictment on our sector and the regulator that so many exist.</p>
<p>"What also surprised me was the lack of focus on returns," he said.</p>
<p>"I felt they talked a lot about fees ... transparency and disclosures, but ultimately the $2.7 trillion question for the sector is about returns. It was almost like the elephant in the room that was never mentioned."</p>
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j.ballantyne1990-6AQqhLzZaK

After cursory examination, Hayne royal commission triggers influx of billions into industry super

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<p class="post-title entry-title">EXPERT OBSERVER</p>
<p class="post-title entry-title">Labor's Bowen and Shorten had insisted they'd adopt all of the Royal Commission recommendations sight unseen - a pretty much ill-advised idea when you think about it - ostensibly because they wanted to be seen as 'tough' on the banks, but just as likely to put pressure on the government to clamp down on lending and credit further.</p>
<p class="post-title entry-title">What the ALP think-tanks hadn't foreseen is the major banks getting off relatively lightly and some cataclysmic reforms recommended for the mortgage broking industry, especially in terms of commission structure.</p>
<p class="post-title entry-title">The initial reaction from Bowen, on his Twitter feed, seemed to misread the mood:</p>
<div>
<div class="separator"><a href="https://2.bp.blogspot.com/-dsgb5a4Mt4Y/XFyPFXaKgdI/AAAAAAAAuWI/vgdeNgBxAHM9NNI2GOoMwVEAPG3HpLHdQCLcBGAs/s1600/CB.jpg"><img src="https://2.bp.blogspot.com/-dsgb5a4Mt4Y/XFyPFXaKgdI/AAAAAAAAuWI/vgdeNgBxAHM9NNI2GOoMwVEAPG3HpLHdQCLcBGAs/s640/CB.jpg" width="640" height="122" data-original-height="138" data-original-width="721"></a></div>
<div class="separator"> </div>
<div class="separator">The Coalition (and apparently even the Reserve Bank Governor) believe that ramming through such wholesale changes to the broking industry warrant caution, since they'd reduce competition in the market, line the pockets of the 4 major banks as they carve up more market share, and decimate the mortgage broking industry, putting thousands of brokers out of business.</div>
</div>
<div>
<br>My view is that overwhelmingly brokers add value to consumers, and help borrowers to navigate the maze.<br><br>Some of the information put forward by the banks during the hearings was misguided at best, misleading at worst.<br><br>Although naturally a 'best interest' test must be enforced, the existing model is superior to a potential fee-for-service alternative.</div>
<div> </div>
<div>It'll be interesting to see whether Bowen is so in favour of implementing all recommendations now.</div>
<div> </div>
<div>If I was a betting man I'd say the ALP will demur on this point, or give a waffling or non-committal answer...else they'll face instantly losing the votes of 16,000 brokers. </div>
<div> </div>
<div>Of course, they might well decide that they don't need those votes anyway given signals from internal polling, but let's see what their response is, if any. </div>
<div> </div>
<div><em>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em></div>
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pwargent-M4siyDbqQY

Royal Commission backfires on mortgage broker reform: Pete Wargent

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<p class="post-title entry-title">EXPERT OBSERVER </p>
<div id="post-body-6541198538703456871" class="post-body entry-content">
<div>What a win it's been for the major banks last week.</div>
<div> </div>
<div>Hearteningly there's been sensible commentary aplenty about the misguided recommendations on the structure of mortgage broking, which don't make any sense with a 'real world' hat on. </div>
<br><div class="separator"><img src="https://3.bp.blogspot.com/-pL1yB52iNFg/XF1iUBBmg3I/AAAAAAAAuWU/6sYwVipdspstnDR_2fu2Cp6ffJpVlmJcQCLcBGAs/s640/CBA2.jpg" width="640" height="364" data-original-height="800" data-original-width="1403"></div>
<br><div>
<span>As prominent industry stalwart John Manciameli has pointed out, imagine the outcry when banks raise mortgage rates off the cuff by 50 basis points on 'funding cost pressures' (or whatever) and customers have to pay another $5,000 fee to refinance out of their loan (leaving the borrower paying </span><span>$10,000 just to get in and out of the deal).</span><br><span><br></span><span>Just one of a thousand potentially daft scenarios. </span>
</div>
<div><span> </span></div>
<div>Everyone agrees that there should be a 'best interest' imperative for mortgage brokers. </div>
<div> </div>
<div>But commission structures should be left alone, and the scenarios being discussed would just load even more power into the four major banks.<br><br>If broking ain't broke...</div>
<div> </div>
<div><em><span>PETE WARGENT</span> is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em></div>
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Banks flying high; mortgage brokers thrashed: Pete Wargent

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<p class="post-title entry-title">EXPERT OBSERVER</p>
<p class="post-title entry-title"><a href="http://petewargent.blogspot.com.au/2018/04/housing-finance-at-6-month-high"></a><strong style="color: #333333; font-family: Tahoma, Helvetica, Arial, sans-serif; font-size: 12.16px;"><span style="text-decoration: underline;">Housing finance to slow</span></strong></p>
<div id="post-body-3782979424120573100" class="post-body entry-content">
<div>The Housing Finance figures were released for February 2018 this week, reported as "Housing finance falls in February" (Australian), "Falls felt for February" (Rate City), and so on.</div>
<div> </div>
<div>Interesting interpretations, given that housing finance was...well, up!</div>
<div> </div>
<div>Anyway, having allowed a few days to elapse, here are four thoughts.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">1 - Loan sizes up</span></strong></div>
<div> </div>
<div>One less well reported thing that I picked up was the rise in the average loan size over the past year to non-first homebuyers. </div>
<br><div class="separator"><a href="https://3.bp.blogspot.com/-sFMQ5qZidWg/WtGJFCzTDCI/AAAAAAAApZs/aQj0azYhYZIaNO6P5i4e-tqwiXO6IcE0gCLcBGAs/s1600/A.jpg" target="_blank"><img src="https://3.bp.blogspot.com/-sFMQ5qZidWg/WtGJFCzTDCI/AAAAAAAApZs/aQj0azYhYZIaNO6P5i4e-tqwiXO6IcE0gCLcBGAs/s640/A.jpg" width="640" height="370" data-original-height="799" data-original-width="1380"></a></div>
<br><div>Across the states, Victoria has been the main driver of rising average loan sizes, although each of the most populous states has seen an increase over the year. </div>
<br><div class="separator"><a href="https://1.bp.blogspot.com/-CTDOLXluGZk/WtGdsxOO_wI/AAAAAAAApa0/gZ5P9igaXOweuEskDqxF_Lbb_8RxHBnmwCLcBGAs/s1600/B1.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-CTDOLXluGZk/WtGdsxOO_wI/AAAAAAAApa0/gZ5P9igaXOweuEskDqxF_Lbb_8RxHBnmwCLcBGAs/s640/B1.jpg" width="640" height="376" data-original-height="813" data-original-width="1377"></a></div>
<br><div>As a result, owner-occupier commitments rose +1.3 per cent in February, and investor loans were up +0.5 per cent, taking total housing finance to a 6-month high of $33.52 billion.</div>
<div> </div>
<div>Drilling the trendlines through the data shows that total housing finance has essentially been flat for 15 months now, while a fair chunk of refinancing has been in evidence within that total.</div>
<br><div class="separator"><a href="https://1.bp.blogspot.com/-1Bjss393W5U/WtGJFgDnoVI/AAAAAAAApZw/njaKD7l4b0YeEKNbUqyQmx4zk0-Po1RswCLcBGAs/s1600/A1.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-1Bjss393W5U/WtGJFgDnoVI/AAAAAAAApZw/njaKD7l4b0YeEKNbUqyQmx4zk0-Po1RswCLcBGAs/s640/A1.jpg" width="640" height="376" data-original-height="812" data-original-width="1377"></a></div>
<br><div><strong><span style="text-decoration: underline;">2 - First homebuyer incentives bite</span></strong></div>
<div> </div>
<div>Another notable trend was that first homebuyer loans were up by a third from a year earlier, driven by New South Wales, where the number of first homebuyers doubled from February 2017.</div>
<br><div class="separator"><a href="https://4.bp.blogspot.com/-5ibkv7O3WjA/WtGJGTuCnxI/AAAAAAAApZ4/1T7jjV8_T0w5zCq41Wx86Xe0xZPWDGBowCLcBGAs/s1600/A3.jpg" target="_blank"><img src="https://4.bp.blogspot.com/-5ibkv7O3WjA/WtGJGTuCnxI/AAAAAAAApZ4/1T7jjV8_T0w5zCq41Wx86Xe0xZPWDGBowCLcBGAs/s640/A3.jpg" width="640" height="382" data-original-height="815" data-original-width="1359"></a></div>
<br><div class="separator"> </div>
<div>Homebuyer commitments for new dwellings rose by +6.6 per cent from a month earlier, but are now in a trend decline from 4-decade highs. </div>
<div> </div>
<div class="separator"><a href="https://1.bp.blogspot.com/-1ntJnZ5ey7U/WtGJHSE47qI/AAAAAAAApaA/uQkffE2SL4sQjzMQMv9_3JghWoZw38fNACLcBGAs/s1600/A6.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-1ntJnZ5ey7U/WtGJHSE47qI/AAAAAAAApaA/uQkffE2SL4sQjzMQMv9_3JghWoZw38fNACLcBGAs/s640/A6.jpg" width="640" height="376" data-original-height="797" data-original-width="1350"></a></div>
<br><div><strong><span style="text-decoration: underline;">3 - Prevalence of non-banks</span></strong></div>
<div> </div>
<div>Thirdly, the trend result for non-bank lending declined in the month, and remains at only around half the peak levels of a decade ago, but will nevertheless remain a key point of interest as lending standards come into focus. </div>
<br><div class="separator"><a href="https://1.bp.blogspot.com/-HIFtpR1pkCw/WtGJHYBPHsI/AAAAAAAApZ8/spmSAsGYg9ME6AkJBC5Jjs_eRtOZTkWHgCEwYBhgL/s1600/A4.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-HIFtpR1pkCw/WtGJHYBPHsI/AAAAAAAApZ8/spmSAsGYg9ME6AkJBC5Jjs_eRtOZTkWHgCEwYBhgL/s640/A4.jpg" width="640" height="388" data-original-height="815" data-original-width="1340"></a></div>
<br><div><strong><span style="text-decoration: underline;">4 - Royal Commission to slow lending</span></strong></div>
<div> </div>
<div>Overall housing finance beat expectations despite a small decline in the actual number of home loans. </div>
<div> </div>
<div>The Reserve Bank of Australia (RBA) noted in its Financial Stability Review that an average of $120 billion of interest-only loans per annum are <strong><span style="text-decoration: underline;">due</span> </strong>for conversion between now and 2021.</div>
<div> </div>
<div>Nothing unknown there, though some people misread that as $480 billion of loans that <strong><span style="text-decoration: underline;">will</span></strong> convert to principal repayments, which isn't going to happen.</div>
<div> </div>
<div>Elsewhere, Moody's reported 30+ day delinquencies at 1.45 per cent, down from 1.52 per cent a year earlier, despite some trouble spots including Gladstone, central Queensland, some suburbs of Perth, and other parts of Western Australia. </div>
<div> </div>
<div>A final point, and a key outcome to watch over the days and weeks ahead is the impact of the Royal Commission into banking misconduct.</div>
<div> </div>
<div>It seems that borrowers will now be required to be provide statements on all debts, a loophole closure which appears likely to be a wise move. </div>
<div> </div>
<div>However, there could be some overreach in terms of brokers needing to audit bank statements to support declared living expenses broken down by category, the aim being to reduce the typical reliance on benchmarks. </div>
<div> </div>
<div>There are many problem with this, not least that borrowers tend to have multiple bank accounts and credit cards these days with different banks.<br><br>Certainly private banking clients and affluent borrowers have never been subjected to such scrutiny, which may lead to some interesting discussions! </div>
<div> </div>
<div>Given that loans are already being assessed at mortgage rates way in excess of the rate actually being paid, it seems like overkill.</div>
<div> </div>
<div>If implemented forcefully this will slow the mortgage market and reduce transaction volumes as brokers and borrowers get to grips with the new requirements.<br><br>Mortgage brokers would presumably also need to consider switching to a fee-for-service model to compensate for the exponential increase in paperwork and compliance.<br><br>Regulators in the UK went through their own mortgage market review (MMR) in 2014 which ultimately lowered the risk of borrowers over-stretching and made the industry more professional.<br><br>The MMR also temporarily gummed up the lending market, so we'll have to see what plays out Down Under. </div>
</div>
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Royal Commission to slow property lending: Pete Wargent

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<p>Louise Sylvan's review of Financial Counselling Services has been released with banks hoping it will help them chart a path towards strengthening Australia’s financial counselling sector.</p>
<p>The Review highlights systematic issues that have plagued the <span>the industry, while noting the </span>importance of financial counsellors in helping Australians who are struggling to repay their debts, manage their household budgets, and provide for their families in a difficult environment.  </p>
<p>The CEO of the Australian Banking Association, Anna Bligh, said that financial counsellors were important to Australians and the banking industry who see them as valuable partners in helping vulnerable customers.</p>
<p>“Financial counsellors get people back on track when they’re experiencing some of the most difficult moments in their lives and provide a valuable education service to people with lower levels of financial literacy and capability,” Ms Bligh said.</p>
<p>“This review charts an important path forward to strengthen Australia’s financial counselling sector.”</p>
<p>Louise Sylvan, who is the former deputy chair of the ACCC, was appointed to lead the review earlier this year, after the Royal Commission (into Misconduct in the Banking, Superannuation and Financial Services Industry) highlighted widespread unethical and criminal behaviour in financial counselling sector.  </p>
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wdavis-8cCN98p7xp

Banks to step up after review into financial counselling sector

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<p>EXPERT OBSERVER</p>
<p dir="ltr">Today the Treasurer has outlined how the government will make sure that banks, insurers and mortgage brokers act fairly and provide services that help, rather than harm, the people they serve.</p>
<p>The Royal Commission was clear - Australians deserve better. We need mortgage brokers to act in the interests of their clients, banks to face real consequences when they break their promises and an end to aggressive sales cultures that leave people with products they don’t need.</p>
<p>We are glad that the Government has committed to move fast on key reforms like stronger professional obligations for mortgage brokers.</p>
<p dir="ltr"><span>Reform to the mortgage broking sector is urgent. We’ve known since ASIC’s 2017 investigation that mortgage brokers fail to get their clients better interest rates and arrange riskier loans. </span></p>
<p dir="ltr"><span>Forcing this sector to act in the best interest of consumers will lead to more people getting a better deal on their home loan.</span></p>
<p>The faster these reforms are legislated, the sooner consumers will be better protected from the practices revealed at the Royal Commission.</p>
<p>But the path to reform won’t be easy, with industry lobbyists already fighting change. </p>
<p>We’ve seen industry lobbyists try and water down every single reform to their sector. We saw it just this weekend with financial advice groups pushing back against new bare-minimum education standards for their profession.</p>
<p>Commissioner Hayne warned that industry groups would attempt to undermine the reforms he recommended by arguing for loopholes or exemptions.</p>
<p>The Federal Government will need to stand strong against industry pressure to ensure that the Royal Commission recommendations are implemented effectively.</p>
<p>Ensuring that the financial sector lives up to community expectations was a major focus of the Royal Commission.</p>
<p>The community expects the Government to stand up for the rights of customers and today is a good start.</p>
<p>The only way to solve the problems uncovered in the Banking Royal Commission is to make sure these reforms are passed as intended, as rapidly as possible.</p>
<p>Alan Kirkland is the CEO of Choice, a <span>leading consumer advocacy group.</span></p>
<p><span> </span></p>
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jrobinson-rf4aSBido9

Reform to the mortgage broking sector is urgent: Choice CEO Alan Kirkland

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<p>GUEST OBSERVATION </p>
<p>Last week’s hearings at the aged care royal commission in Brisbane looked at regulation in aged care. While rules and regulations are designed to safeguard residents, bureaucratic “red tape” also contributes to the failings in aged care.</p>
<p>The fear among nursing home staff of failing a review visit by an Aged Care Quality and Safety Commission surveyor has been known to shift the focus from care for residents to meeting paper trail requirements.</p>
<p>The best outcome for aged care residents and their families would be new reporting requirements <a href="https://www.researchgate.net/publication/335110268_The_Distinction_between_Process_and_Outcomes_Focused_Governance_and_Accountability_Frameworks" target="_blank">centred on outcomes rather than processes</a>. Their primary focus should be on the mediation of critical incidents – that is, looking at what caused them and how they could be prevented in future – and the maintenance of health.</p>
<p><strong>How did we get here?</strong></p>
<p>The crisis in the aged care sector has emerged over time. At least in part, systemic problems in organisations <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/%28SICI%291099-1735%28199603%2913%3A1%3C13%3A%3AAID-SRES66%3E3.0.CO%3B2-O" target="_blank">arise from interactions</a> among its key players. These interactions must be aligned to achieve its <a href="https://pdfs.semanticscholar.org/e33a/5f696b7af6c2eaa3fdbefe94dbf42234bebe.pdf" target="_blank">common goals</a>.</p>
<p>But the key players in the aged care system pursue divergent agendas. Regulators focus on process adherence, while staff struggle with their limited capacity to manage the complex needs of residents. Meanwhile, proprietors focus on economic viability.</p>
<p>The prevailing approach of dealing with the problem of a particular key player in isolation will not solve the problems of aged care as a whole.</p>
<p><strong>Governance and accountability</strong></p>
<p>Our research suggests the need for a major culture shift in the aged care system.</p>
<p>Around the world, governments are being urged to put less emphasis on <a href="http://johnbraithwaite.com/wp-content/uploads/2016/06/Regulating-Aged-Care-Ritualis.pdf" target="_blank">process measurement</a> and more on <a href="http://www.iqg.com.br/uploads/biblioteca/the_strategy.pdf" target="_blank">outcome transparency</a>.</p>
<p>Peter Drucker, a well-known management consultant, educator and author, once said “management is doing things right; leadership is doing the right things”.</p>
<p>Ticking the boxes of a protocol to demonstrate “regulatory compliance” – that is, doing things right – is no longer an option on its own. Residents and their families expect staff to be attentive to residents’ changing <a href="https://www.propertyobserver.com.au/https://www.ncbi.nlm.nih.gov/pubmed/19674233" target="_blank">physical, emotional, social and cognitive needs</a>; that is, doing the right things.</p>
<p>These insights tell us the aged care system needs to be <a href="https://www.propertyobserver.com.au/https://www.springer.com/gp/book/9783319646046" target="_blank">redesigned</a>.</p>
<p><strong>What would this look like in practice?</strong></p>
<p>Let’s consider two common aged care problems – falls and diabetes – whose management is significantly influenced by the chosen accountability framework. The differences between an outcomes-based approach (that is, adapting care to problems in their context) and a process-based approach (adhering to a protocol) are stark.</p>
<p>The first example: a resident has a fall. Rather than only assessing her for injuries and vital signs (as per protocol), staff would also assess potential reasons for the fall – for example, lack of mobility, pain, low blood pressure, or polypharmacy (taking multiple prescription medications at once) – and involve allied health professionals in preventive and rehabilitative care. This could include muscle strengthening exercises, gait and balance retraining, pain management and medication review. These are measures that could reduce the likelihood of the patient falling again, thereby improving her outcomes.</p>
<p>And let’s take a resident with normally stable diabetes, who one day records an elevated blood sugar reading. Rather than just giving him more insulin, staff would also assess potential underlying reasons for the elevated reading. These could include loss of appetite, an infection, or an episode of <a href="https://www.mayoclinic.org/diseases-conditions/delirium/symptoms-causes/syc-20371386" target="_blank">delirium</a>.</p>
<p><strong>The royal commission should do many things, but adding red tape isn’t one of them</strong></p>
<p>Increasing frailty and/or significant memory decline are the main reasons for admission to an aged care facility. These people are particularly vulnerable as their health changes frequently and rapidly.</p>
<p>Being bogged down by <a href="http://johnbraithwaite.com/wp-content/uploads/2016/06/Regulating-Aged-Care-Ritualis.pdf" target="_blank">regulatory ritualism</a> reduces the time staff have available to spend on residents’ physical, social, emotional and cognitive needs.</p>
<p>True accountability in aged care is achieved by demonstrating how the provided care has impacted a resident’s well-being. In that regard, the Aged Care Quality and Safety Commission should provide leadership and primarily act as an educator, helping facilities to become <a href="https://www.penguinrandomhouse.com/books/163984/the-fifth-discipline-by-peter-m-senge/9780385517256/" target="_blank">learning organisations</a>. If an aged care facility fails to “learn and improve”, then sanctions and penalties become necessary.</p>
<p>More bureaucracy would only serve to perpetuate the current crisis, and would fail those residents and families who have suffered from <a href="https://agedcare.royalcommission.gov.au" target="_blank">the current failings in the sector</a>.</p>
<p>Len Gainsford, a former adjunct research fellow in accounting &amp; governance at Swinburne University of Technology, contributed to this article.</p>

<p><img src="https://counter.theconversation.com/content/121561/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1"></p>

<p><em><strong>Joachim Sturmberg</strong>, Conjoint Associate Professor of General Practice, University of Newcastle.</em></p>
<p><em>This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/red-tape-in-aged-care-shouldnt-force-staff-to-prioritise-ticking-boxes-over-residents-outcomes-121561" target="_blank">original article</a>.</em></p>
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Red tape in aged care shouldn’t force staff to prioritise ticking boxes over residents’ outcomes

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<p>Australian Finance Group has reshaped its executive team in preparation for the heightened industry and regulatory engagement required in the post-Royal Commission environment.</p>
<p>Reflecting AFG’s increasingly diversified earnings base, the management changes also consolidate executive accountability for all residential mortgage product sales and elevate the leadership role for the growing AFG Securities (AFGS) business.</p>
<p>Under the new structure, AFG General Manager Residential &amp; Broker Mark Hewitt will take up the new position of General Manager Industry &amp; Partnership Development. AFG Home Loans General Manager Chris Slater will assume the broader sales and distribution leadership role across both the residential broking and the AFG Home Loans businesses. AFG will also appoint a General Manager for the AFGS business, a new role on the executive team that reflects the increasing importance of the business line.</p>
<p>After leading AFG Sales and Distribution team for the past 13 years, Mark will maintain responsibility for the company’s residential mortgage lending relationships and his mandate will be expanded to include all lender relationships across our AFG Home Loans, Commercial, AFG Business and Personal Loans business lines.</p>
<p>AFG Chief Executive Officer David Bailey said “The external forces impacting our business across the past 18 months have underlined why it is crucial to constantly engage with the broader industry and continue to position AFG as taking a leadership role in the market with both regulators and our lending partners.</p>
<p>“While we have done a tremendous job in reminding regulators, politicians and the broader community of the vital role our industry plays in delivering a competitive lending market, we must ensure that the broker proposition remains front and centre of the debate as the industry shapes its future over the next three years.</p>
<p>“During the recent challenges the mortgage broking sector has faced, Mark has played a significant role in ongoing advocacy of both AFG and the broader industry, stewarding much of the activity undertaken as our industry became a focus during the election campaign.</p>
<p>“With the three-year review period now underway, the need for AFG and the industry more widely to represent our brokers positively in the eyes of regulators and government is even more important. Mark will focus on our engagement with regulators and work to drive positive change across the industry.</p>
<p>“With Mark’s move into the new role, Chris will assume the position of Head of Sales and Distribution for all residential products and continue his influence over AFG’s commercial white label Thinktank product.</p>
<p>“Chris has a depth and breadth of knowledge across our business with his moves from National Accounts Manager in Queensland to NSW State Manager to General Manager AFG Home Loans in Perth. The skill sets and passion Chris has demonstrated in those roles over the past 12 years will hold him in good stead as he takes up this new challenge. I congratulate both Mark and Chris on their appointments.</p>
<p>“The changes strengthen our leadership across the business and reflect the priorities of the business as we continue the diversification of our earnings base.”</p>
<p>AFG is planning to invest in a growing part of its business with a newly created role of General Manager for its AFG Securities business. AFGS hit a milestone recently when it reached $2 billion under management, underlining the growth of the business line.</p>
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Mark Hewitt and Chris Slater get more responsibilities at AFG

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<p>GUEST OBSERVATION</p>
<p>Will the banking services royal commission have a lasting effect of improving the banking and financial sector? The answer is “no”. A temporary change is apparent, but the problems lie deeper than those <a href="https://theconversation.com/banking-royal-commission-no-commissions-no-exemptions-no-fees-without-permission-hayne-gets-the-government-to-do-a-u-turn-110974" target="_blank">addressed by the royal commissioner</a>.</p>
<p>The worldwide pervasiveness of financial sector misconduct is an indication.</p>
<p>This is not a criticism of the Royal Commission as such. It had a limited mandate and limited time, although its approach of focusing on Australian case studies further limited its scope. And a broader investigation of economic and social underpinnings of financial sector misconduct would have required a different sort of Inquiry.</p>
<p><strong>It’ll be hard to act on the report we had</strong></p>
<p>Even then, any recommendations for fundamental changes to financial sector structure and activities needed to inhibit misbehaviour would have to run the gauntlet of gaining political support in the face of vested interests.</p>
<p>The response to, and government capitulation on, the Hayne recommendation regarding <a href="https://theconversation.com/sam-and-the-honest-broker-why-commissioner-hayne-wants-mortgage-brokers-to-charge-fees-114071" target="_blank">mortgage broking fees</a> starkly illustrates the point.</p>
<p>Why will the recommendations not be a lasting solution? An important reason is that the royal commission interpreted “behaviour consistent with community standards” in a limited way to refer to situations in which customers were actually harmed.</p>
<p>But much of community angst over financial sector conduct relates to the broader use of market power and superior knowledge to extract an “unfair” share of the benefits from transactions with customers.</p>
<p><strong>And it missed the broader problem…</strong></p>
<p>Customers don’t get a fair share of the benefits from transactions, competition doesn’t work to make sure they do, and customers are often unaware that they have been exploited.</p>
<p>Why is it happening? The answer lies partly in this comment of Royal Commissioner Kenneth Hayne on page 54 of his <a href="https://financialservices.royalcommission.gov.au/Pages/reports.aspx#interim" target="_blank">interim report</a>: "Much if not all of the conduct identified in the first round of hearings can be traced to entities preferring pursuit of profit to pursuit of any other purpose"</p>
<p>Economists will rightly argue that there is nothing inherently wrong with the pursuit of profit or self-interest. It facilitates the efficient allocation of resources.</p>
<p>But unless it is accompanied by a concern with fairness (“do unto others as you would have them do unto you”) in situations of market power and superior information, as typically occurs in financial markets, it will lead to vulnerable consumers being exploited.</p>
<p><strong>…which is a grey zone of unfairness</strong></p>
<p>There is a large and poorly defined grey area between self-interested but clearly fair behaviour and self-interested unfair behaviour, which, in turn, merges into misconduct and illegal activity.</p>
<p>It is difficult for (particularly large) institutions operating in that grey area, even if committed to “fairness”, to ensure their employees do not slide towards the boundary. Or over it.</p>
<p>Moreover, competition between financial institutions in search of profits can lead to a “race to the bottom” in terms of lower financial product quality. This is not always apparent to some (or many) consumers – at their expense.</p>
<p><span style="font-size: 12.16px;">The financial sector particularly vulnerable to this problem.</span></p>
<p>First, many financial products and services are “<a href="https://www.investopedia.com/terms/c/credence-good.asp" target="_blank">credence goods</a>” where the consumer needs them but is unable to assess their real worth either before or after the purchase.</p>
<p>A perfect example is a visit to the doctor. Often the reason we are visiting the doctor is because we don’t know what’s wrong with us. It makes it necessarily difficult or impossible to tell whether the doctor is good at her job.</p>
<p><strong>Bankers sharpen their claws on each other</strong></p>
<p>Second, much of the activity in financial markets is about trading and making profits (supposedly using superior information and expertise) at the expense of the another party in those markets.</p>
<p>If it is “right” for that part of the entity that does that to make money at someone else’s expense, why is it wrong for the part of the entity that deals with consumers to do that?</p>
<p>Here’s how the Commission could have tackled these problems in order to achieve real, longer term benefits.</p>
<p><strong>Yet we license them…</strong></p>
<p>First, it could have considered whether giving financial institutions a valuable “social licence” to operate in important business areas under advantageous institutional structures should bring with it extra enforceable obligations.</p>
<p>It could have also considered whether, given the lack of misconduct found in the mutual and cooperative sector, banks and other financial institutions could be organised more like mutuals.</p>
<p>Second, it could have recommended changes that would have given stakeholders other than shareholders (such as depositors and employees) a greater say in running those organisations (perhaps at board level) and a say in shaping their culture.</p>
<p><strong>…and we could change the way they’re run</strong></p>
<p>Third, it could have recommended structural separation between the retail and wholesale arms of firms to reduce complexity and the risks of deficiencies in control systems.</p>
<p>Structural separation could have also reduced the risk that the culture of trading and position-taking, in which profits are made at the expense of another party, spilled over into other parts of the institution where it wasn’t wanted.</p>
<p>Finally, it could (and should) have concentrated more on consumer protection.</p>
<p>It is a much broader issue than deterring and penalising misconduct.</p>
<p>Until consumer financial literacy catches up with financial product innovation and complexity, there will continue to be a big “market for financial misconduct”.</p>
<p>Exhorting institutions to do no harm won’t take it away.</p>
<p><em><strong>Kevin Davis</strong>, Professor of Finance, University of Melbourne</em></p>
<p><em>This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/do-no-harm-isnt-enough-why-the-banking-royal-commission-will-ultimately-achieve-little-116076" target="_blank">original article</a>.</em></p>
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