ISA questions ‘scandal-prone’ banks’ role in super

In a statement, ISA said the former chief executive of the FSC was reported saying the big four banks should sell their wealth management arms.

"Vertical integration and flawed remuneration policies are plaguing the banking and financial services industry," ISA cited Mr Brogden as saying.

"If I was on the board of the one the big four banks at the moment, I would be telling the executive to look at selling their wealth management arm."

ISA has backed these remarks, arguing that the governance and culture of major banks is currently the "number one risk" in the financial services industry.

"During the first quarter of 2016, we have had more bank scandals reported than public holidays in Australia. In the midst of these scandals, the banks have shamelessly sought to redesign the super system to suit their business models," ISA chairman Peter Collins said.

"Over the past two years, we have seen the banks lobby to remove consumers' protections for people who need financial advice, lobby to dismantle the governance model of not-for-profit funds, and lobby to remove protections for people who do not choose their own super fund."

Mr Collins said this behaviour was evidence that "members' interests are not being prioritised" and raised questions about whether banks should be part of the super system.

"The Productivity Commission review of the super system will provide one opportunity for a thorough assessment as to whether the business model of the scandal-prone banks is consistent with the best interests of super fund members," he said.

Last week, The Ethics Centre executive director Simon Longstaff told ifa that vertical integration within the financial services industry could be successful once financial advisers were recognised as professionals.