News & Downloads

Downloads News Newsletters

financial services misconduct

Monday, April 8, 2019

Are our pollies dropping the ball on financial services misconduct?

Remember the Royal Commission into the financial services industry? It almost feels like ancient history now, doesn’t it?

At the time, of course, it was all that many people were talking about. Such was the trail of destruction uncovered by the inquiry, hardly a week went past without a new headline, accompanied by details of how a bank or financial planner’s customer’s were poorly treated.

So strong and constant was the flow that we all got a little punch drunk; the shock and horror was replaced by a resigned ‘here we go again’ feeling.

Still, the damage was so unbelievable and widespread, that we were sure change was afoot. So surgical was the legal scalpel wielded by Rowena Orr, QC, in particular, we wondered how many would recover from the damage.

And some, indeed, didn’t recover. A couple of smaller operations went out of business. A few careers were wrecked — either temporarily or permanently. As of now, we don’t know which.

A couple of high profile businessmen — NAB’s Chair and CEO, no less — learned the cost of not showing due contrition.

Beauty. Change was afoot.

Before Commissioner Hayne’s report was handed down, the Federal Opposition promised it would implement the recommendations ‘lock, stock and barrel’

After it was handed to the Treasurer, the government promised ‘Action on all 76 recommendations’.

Fantastic. Action at last. Consumers would be looked after. Investors would be protected.

And then? And then…       Frankly, it’s hard to know.

Yes, the banks have made ‘provisions’ in their accounts for restitution. NAB has a new management team.

And?… well, not much.

Encouragingly, ASIC has rediscovered its teeth. Or, likely, has been given the political cover to do what it always wanted to do, but was constrained from doing by a lack of funding. That’s to the good, and more power to ASIC head, James Shipton’s arm.

What else? Let’s see.  It must be around here somewhere.

Commonwealth Bank’s wealth management spin-off, announced in October, is no longer going ahead. Apparently for commercial reasons.

Coincidentally, the Royal Commission didn’t make the banks separate their planning businesses from their ‘product’ (read: funds, insurance etc) operations


The changes to mortgage broking? Well, the government isn’t going to adopt Commissioner Hayne’s recommendation that the broker’s fee should be paid by the customer. And more recently, it’s also going to allow them to keep their trailing commissions, too.

So what, really, are the substantive, lasting changes stemming from the Commission’s hearings and report?

No seriously, I’m asking. Does anyone know?

Because I don’t.

Oh sure, some of the bankers and financial planners will be scared straight. For a while, anyway. But nowhere are memories shorter than in financial circles.

Just ask the people who are selling CDOs again, merely a decade since they were the very things that sent some investment banks broke and almost destroyed the financial system.

AMP may never regain its former glory, its reputation potentially permanently stained by the evidence.

And a few finance professionals are looking for work, or striking out in new directions.

But the rest?

More directly: Does anyone really think there will be lasting change as a result? Or more concretely, have there been any permanent changes that will stop this sort of thing happening again?

I won’t wait for an answer. I have things to do.

Don’t get me wrong: I’m an optimist in general. I’m not going to stop saving or investing as a result.
And as I’ve said previously, on a purely selfish level, the status quo is great for The Motley Fool. If other financial advice is conflicted, and we’re not? That’s wonderful for business.

It just sucks for those people who don’t realise that not much has changed. Who expect to be able to receive conflict-free financial advice.

Who don’t know to ask the question.

Or who accept assurances — even well-meaning ones — that, despite the conflicts, the advice is on the level.

ASIC surveys have already put paid to the idea that, on the whole, non-independent planners give unbiased advice.

And yet, neither Commissioner Hayne, nor the government, nor the opposition have seen fit to forcibly separate the provision of advice from the selling of products by the same business.

For the record, I don’t doubt Commissioner Hayne’s integrity or intentions. He’s seen and heard more evidence than the rest of us put together. But I, respectfully, disagree with his conclusions.

I don’t know whether he’d say he was unhappy with the lack of real change in the weeks since he handed his report to Treasurer Frydenberg.

But I am.

Scott Phillips
Chief Investment Officer, The Motley Fool   published 31st March, 2019

Roseby Rosner & Young is a Certified
Practicing Account

Keep Updated

Receive the latest Tax Updates newsletter,
news and event information.