The big day is nearly upon us. On Monday, Commissioner Ken Hayne and his assisting special counsel assemble in Melbourne for the first public hearing in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. And planners are…ambivalent.
If what we’re hearing is correct, the expectation is it will be business as usual in planner land, while other parts of the financial services landscape play catch up. Research by CoreData tells us planners have little concern that Hayne and his team will target advice. This view has been broadly matched by anecdotal evidence from planners, who say they think the scrutiny financial advice has faced, via the Future of Financial Advice reforms and the path to professional standards, should inoculate them from further inspection.
Given the scope of the inquiry and its reporting deadline, we don’t know the precise level of attention planning will receive, but ignoring it would be a significant oversight.
The royal commission’s role is to uncover systemic failures that lead, or have led, to poor consumer outcomes. We know it will home in on behaviour that “falls below community expectations” and decide whether remedial action is necessary to prevent the same outcomes from being repeated on loop.
Part of the process will be reviewing evidence from clients who experienced those outcomes. Earlier this week, it was reported the royal commission would not provide legal protection for victims already subject to gag orders; however, there are many victims who didn’t receive a settlement, and have perhaps been afraid or without resources, who will now have a forum to share their experiences.
When asking “how” and “why” these poor outcomes occur, it will be difficult to ignore how institutional structures have contributed to consumers receiving advice or products that weren’t in their best interests. To make the connection, you only have to look at all of the prevailing forms of conflicted remuneration (even those under another name), the cultures still geared around sales and targets, and the approved product lists that leave little scope for consumers whose needs fall outside of them.
If the commissioner concludes those structures have contributed to less-than-adequate outcomes for consumers, he will, we hope, go beyond FoFA and the Financial Adviser Standards and Ethics Authority’s remit and reset the rules around how those in a client-facing role in financial services make their decisions and remove the drivers that could contribute to a negative result. This could only be a good thing for professionalism and would complement, rather than compete with, the work of FASEA.
If I was a planner intent on my industry becoming professional, I would be paying close attention to the royal commission and what more it could – and should – do to improve the overall trust and reputation of financial planning.