RC interim report shames ‘dishonest’ and ‘greedy’ industry

28 September 2018

Commissioner Hayne has taken a hit at the financial advice industry for its “dishonesty and greed” in the Royal Commission’s interim report.

Hayne said financial advisers who charge for doing what they do not do is dishonest and giving advice that does not service the client’s interests, but profits the adviser is equally dishonest.

“No matter whether the motive is called ‘greed’, ‘avarice’ or ‘pursuit of profit’, the conduct ignores basic standards of dishonest,” he said. “Its prevalence and persistence requires consideration of the issues of culture, regulation and structure.”

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Hayne highlighted that the general response to scandals like Storm financial has been to blame the misconduct on “a few bad apples”, but given that generally similar conduct occurred in all of the major entities, the Commissioner said the excuse no longer stands.

“It ignores the root causes of conduct, which often lie with the systems, processes and culture cultivated by an entity,” he said.

Hayne delved into the Future of Financial Advice (FoFA) reforms, and determined that the conflict of interest described in the Corporations Act was in fact a conflict between the financial interests of the adviser and the duty it owes to the client. He said generally, the choice between interest and duty has been resolved, more often than not, in favour of self-interest.

“And they are results that, on their face, deny a fundamental premise for the legislative scheme of the FoFA reforms: that conflicts of interest can be ‘managed’ by saying to advisers, ‘prefer the client’s interests to your own’,” he said.

Hayne said conflicted remuneration for financial advice was permitted to continue by grandfathering provisions, but questioned whether they could really be justified today if the premise for the conflicted remuneration provisions is accepted.

“At the time the changes were first made, participants in the industry could say that sudden change in remuneration arrangements may bring untoward consequences for countervailing benefits that would not outweigh the harms of disruption,” he said. “Has that argument now outlived its validity?”

Hayne then recited ASIC’s submissions, which said that any exception to the ban on conflicted remuneration has the ability to create misaligned incentives, which could lead to inappropriate advice.

He rhetorically questioned what answer there could be to those (ASIC’s) observations about advice, given that in three out of every four cases examined, the advisers appeared to have preferred their own interests to those of the clients.









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".......given that in three out of every four cases examined, the advisers appeared to have preferred their own interests to those of the clients" (Commissioner Hayne)

That can't be right. Over many years of talking to adviser's, it would seem each and every one of them would have you believe that they are well and truly in the top quartile of honesty and integrity within the advice industry.

My, my, to have such accusations levelled en masse, must be just horrendous for such a group of caring, intelligent, thoughtful professionals.

Suppose at least it isn't like the RC in 2015 that labelled Unions as 'thugs, thieves, perjurers' liars and an environment where not only does this flourish but is actively rewarded and encouraged'. Maybe we should take the same remediation they undertook which was,,, nothing except the middle finger salute, in their truly classy style.

Vote 1 best comment here^^^^. Haha

APl, I hope that comment made you feel good, you got to puff the chest out and be sarcastic at the same time how smart. If this is what makes you happy, getting onto a site and making horrible comments, looking for arguments, I feel very sorry for you. Don't worry about us advisers, we have clients that really value our service in the real world, we will always be here helping people where we can.

Hey, hang on there a minute Hang on, sarcasm can be a very difficult satirical remark when presented solely in the written form. I am so glad you were at least able to pick up on it. Oh, and the comment about being smart at the same time, absolutely agree with you there. As Oscar Wilde once said "Sarcasm is the lowest form of wit but the highest form of intelligence,”

But for future reference, It may be a much smarter response strategy to address the spirit of the writers comments rather than fashion an immature diatribe aimed solely at the writer.

Defending the indefensible can be difficult but at least you could give it a go. Go on, defend the advice industry in the light of the RC revelations. Let,s see a mature, well presented factual argument.

Ah the Humanities degree, HELP money well spent.

Hahaha TisGoldThatIs, think you just pipped me for the No1 comment now with that one!! :)

It is a dangerous argument to make. "after a death adviser payments to stop because the member is dead". It is only s small step to "super fund admin payments to stop because the member is dead". "The member never used the call center so their portion of call center fees should be refunded", "The member did not claim any insurance so their insurance fees should be refunded." The fees were charged because the potential for a claim, or a call to the call center existed and the fund had to keep the service operating. It is not based on individual use of the service. Why is the logic different for advisers.

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