Objectively, Hayne barely earned a pass mark

6 February 2020

As is frequently the way with such events, much was made of the 12-month anniversary of the handing down of the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industry which saw much praise being heaped on the Commissioner, Kenneth Hayne.

The underlying theme adopted by many commentators was that the Royal Commission, under the leadership of Hayne, had succeeded in identifying a multitude of sins in financial services and then recommending a series of measures which would bring the industry, particularly the financial planning industry, to a level acceptable to the broader community.

That theme flatters Hayne. Stripped back to the fundamentals, the Royal Commission can be seen to have traversed little that was not already known and was already being addressed by the Government, the regulators and the industry itself and to have stopped doing its work before it might have actually reached into new areas.

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Fee-for-no-service, the issue which appeared to fascinate and absorb Hayne and his Counsel Assisting, had already been identified by the Australian Securities and Investments Commission (ASIC), just as the question of phasing out grandfathering had also been identified, along with the frequency of fee reviews under the terms of the Future of Financial Advice (FoFA) changes. 

Then, too, the Government had already put in place a timetable and methodology for reviewing the success or failure of the Life Insurance Framework – yet this did not stop Hayne from moving beyond his brief to recommend dialling down life commissions to zero.

Of significance is the fact that, on the first occasion a Royal Commission referral was put to the test in the Federal Court – the Australian Prudential Regulation Authority’s (APRA) case against IOOF – the regulator failed to make its case and ended up paying costs.

However, such were the political priorities of early 2019 that the Government, via the Treasurer, Josh Frydenberg, leapt upon Hayne’s recommendations and committed the Government to an almost unquestioning rubber-stamping of their contents and adherence to an implementation timetable ending in December, this year.

In the pursuit of this almost unquestioning objective, the Government has seen fit to trample across some of its own measures, not least allowing a modicum of industry self-regulation in the form of code-monitoring as part of the broader Financial Adviser Standards and Ethics Authority (FASEA) regime, and accepting that despite its faults and the efforts of some players to ‘game’ the system, the FoFA changes were working and may have been made to work even more effectively.

Where the Royal Commission got it right was in its analysis that the financial services regulators could have done much better. Where the Royal Commission erred was in Hayne’s decision not to continue its probe, particularly with respect to the operations of the superannuation sector.

And as Frydenberg continues his efforts to meet his self-imposed implementation timetable, the financial planning industry is left to ponder what it will end up costing them in terms of time, money and higher industry levies to pay for the single disciplinary body which was recommended by Hayne despite the Government having previously encouraged the industry to pursue the establishment of code-monitoring bodies.

Political analysis suggests that most financial planners tend to support Liberal/National Party Coalition Governments, there is precious little evidence this Government is supporting them.

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The RC was largely about the banks and not the whole Industry which was not guilty !

Well said Mike but give this message to every media outlet in Australia; even Andrew Bolt, Allan Jones and Peta Credlin and especially Senator Amanda Stoker!.. The result of the Enquiry was a disgrace. Paltry, Superficial, looking to be sensational, and highlighting Advisers.
Industry Funds with all their self centered operations, donations to Unions and Labor, dirty advertising and very poor performances and their habit of thieving Franking Credits from individual Members completely escaped censure! .

You forgot to add group insurance (should be cheaper than retail), with poorer t&c’s (should be cheaper) and pays no commission (theoretically at least and should be cheaper) is MORE expensive often than retail policies. There’s a black hole of money here somewhere as it doesn’t make sense, where does all the money go? I dunno BS advertising, cross subsidising fees (breach of fiduciary duty), prawn sandwiches in the box at the MCG?

Nothing to see here people all’s good in union fund land...for the unionists at least.

Hayne wouldn’t comply with FASEA, lacking competence to understand what he pontificating on and a lack of diligence to actually understand the issues at their root level.

Part of the reason union fund group insurance is so expensive is because in the past they provided very high sums insured with little or no underwriting or exclusions. Some funds even allowed this for employees who were established in a job and switched super to them by choice. It was essentially yet another union fund gimmick to boost membership. Consequently lots of people with poor health records flocked to the union super funds at the time. It was actually publicised by some of the chronic disease support groups as a way to get insurance without medical exclusions. Sooner or later it had to lead to a claims blowout, significantly increased premiums, and much tighter Ts & Cs.

Well said Mike

Hayne did more damage than any good. It may have pushed the thieves (banks) out of the industry, but decimated the great work and value of the advisers.

At the start of the RC, Hayne made some encouraging comments about seeking simpler and less regulation for financial services. By the end of it his lawyer mates had obviously reminded him that lawyers make money out of lots of complex regulation. So instead of simplification he came up with swathes of new regulations to further complicate an over complicated environment. A huge loss for consumers, but a big win for lawyers and compliance bureaucrats.

There was one simple thing Hayne could have done to remove most of the problems in financial advice, while at the same time reducing complexity and cost. Ban vertical integration.

This fundamental structural problem still remains under Hayne's mountain of expensive and cumbersome new regulations. It will continue to cause problems. Hayne should be ashamed for wasting taxpayers money and wasting an opportunity for reform that would benefit consumers rather than lawyers.

Another insightful and well balanced article, Mike, thank you.

I am still bemused how during the RC on the day industry super representatives took the stand, the hard hitter bulldog lawyers and even Haynes himself took a leave of absence, and left a simpering joking junior to pat them on the back.

If Hayne had pursued that vertical integration in any form was to be banned, or else a different stystem denoting IFA as financial planners and product provider rep's as 'agents' or even simply 'product representatives', then I could half believe he was potential competent and that he wasn't gotten to by the unions.

Mike, you've got complete support from correspondents.
There are plenty of angles where this Commission failed.
The most work Haynes appeared to do was to allocate numbers to exhibits in his distinctive authoritative and ponderous way.
His dismay at advisers continuing to advise on the portfolios of Estates said it all.
For example, NO acknowledgement that Advisers need to monitor Portfolios at all times, thereby keeping an eye on the effects of economic changes, market changes, the work and competence of Funds Managers, the need to act on Legislative changes, etc. all while the LAWYERS take their time administering an Estate for months and years. Did he think the Advisers should continue their work unrewarded? Obviously he did. But get a Lawyer to do photo copying or send a letter for FREE! NO CHANCE!!!!!! Does HAYNE REALLY WANTS SERVICE FOR NO FEES!!!! FAIR SUCK OF THE SAUCE BOTTLE, MATE!
This person who ignored Frydenberg's attempt to shake his hand when he handed over his final report, displayed the same attitude when he allowed the young QC/SC assisting to humiliate Ken Henry, one of our most successful, important and valuable Public Servants, when he was being very helpful in detailing the workings of our Industry using well reasoned Logic and experience.
I am dismayed that the Government did not throw out most of the findings. They should have!!!
Surely it is a mistake to employ people to undertake long winded enquiries after they have been deemed no longer suitable to remain in their career, in this case, working as a Judge. Hayne was justifiably well known for his early accomplishments and studies but nevertheless prepared in later life to be a singular voice and perhaps this explains his distinctive application to his brief in this case and his divergence from it. His NON investigation into INDUSTRY FUNDS justifies another ROYAL COMMISSION.

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