The Royal Commission interim report has shone a light on the poor culture of licensees, with Hayne specifically making an example of fees-for-no-service.
Hayne said one simple conclusion could be made: the root cause of the fees for no service conduct was greed by licensees and advisers.
The Commissioner pointed to the Australian Securities and Investments Commission’s 2016 report on fees for no service, which singled out the big four banks and AMP as culprits for what Hayne said was “obviously wrong”.
And, while Hayne acknowledged it was advisers who stood to gain a financial advantage by making an ongoing service arrangement, he put the onus back on the licensee, which he said “did nothing to prevent advisers having more customers on their books than they could monitor or advise manually".
The problem won’t be solved by regulation, according to the Commissioner, rather it’s a matter for the client and the adviser to decide what, if any, services will be provided after the provision of initial advice.
“But it is consistent with the policies that underpinned the FoFA (Future of Financial Advice) reforms to consider first, how long a contract for future services can be made and second, what responsibility any entity asking for payment of fees for future services should have for verifying that the client has authorised the payment,” he said.
Hayne suggested that the adviser and client should have to renegotiate an ongoing service arrangement annually, and where clients have invested funds through platforms, the investment entity should not deduct amounts that are to be paid to the licensee or adviser without the express authority from the client.