As the financial services industry today mulls over the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, it would do well to consider not only the targets the Royal Commission hit but also those targets it missed.
It is an unfortunate reality of all Royal Commission exercises, particularly those working to a time-frame, that for as many of the issues which have been identified in Commissioner Kenneth Hayne’s final report, there have been plenty of instances of misconduct which have been missed.
Many financial planners will argue that the industry funds were not subjected to enough scrutiny, particularly where the sole purpose test is concerned, while others might argue that the Royal Commission failed to target the right senior executives within the major banks and insurance companies with too many department heads being represented by their deputies.
Still other critics might argue that the Royal Commission failed to traverse some of the outstanding issues relating to the collapse of Trio/Astarra, not least the role of the regulators and some industry representative organisations.
But, arguably, the Royal Commission has hit many serious targets including the corporate machinations which led to fee for no service, the inherent inappropriateness of out-going telephone-based life/risk sales and the inherent conflicts which exist for superannuation funds operating within large, vertically integrated structures.
The Royal Commission also successfully identified the shortcomings of the financial services regulators, notwithstanding the energy they have been seen to exhibit since the start of public hearings in March, last year.
That energy has seen the Australian Prudential Regulation Authority (APRA) initiate action against IOOF Limited while the Australian Securities and Investments Commission only today announced further measures against Commonwealth Financial Planning under the terms of an enforceable undertaking.
However, the regulators must be judged on what they did or did not do before the Royal Commission, not after. Further, those firms they are now seeking to pursue must be judged in terms of the relationships the regulators encouraged before December, 2017.
In the end, the impact Hayne’s recommendations will make on the industry will depend in large part on how many are actually actively implemented by the Government of the day, and by what means. Both sides of the political fence know that it would be political folly not to accept and act on Hayne’s final report, no matter how painful that might be.