If you’ve been watching the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry hearings live, you will understand why Romans used to get along to the Colosseum in big numbers to watch lions interacting pretty conclusively with Christians.
As was widely predicted, the Melbourne hearings have made for good listening and watching because the commissioner, Justice Ken Hayne, holds most of the cards.
And when he doesn’t hold some piece of damning information about a major bank or insurer’s egregious behaviour in, for instance, charging some client for advice they never got, he merely has to question whichever witness is sweating under the hot lights for a bit of clarification.
Most of the heavy lifting is done by the counsel assisting, in this case the tag team of Rowena Orr and Michael Hodge. She tends to lay out the explanation of how the industry has been operating, warts and all, and he asks the questions.
This is why the occasional intervention by the commissioner, who in the Colosseum analogy could be a world-weary lion, tends to hold the audience spellbound. He’s onto something.
On Monday, Australian Securities and Investments Commission deputy chair Peter Kell was enjoying a fair wind behind him, running through the breathtakingly simple sin of AMP charging clients for advice not provided, when Hayne suggested there might be a difference between “selling what you can’t deliver, selling what you won’t deliver, (and) selling what you don’t deliver”.
Kell said, “I think it’s a good way to capture the issue, commissioner”, only to be slapped down with the observation that, “Flattery will get you nowhere. You have got to answer the question, Mr Kell.”
After which, Kell ended up agreeing that there could well be a legal issue in the case of selling what you won’t deliver.
No one’s safe – and that’s how things go when you are one of the ‘good guys’. When you’re a senior executive of AMP, as Anthony “Jack” Regan was in the box for more than a day, it’s a world of pain.
Regan had his feet held to the fire by Hodge – who looks young enough to be his son – not because of AMP’s already admitted sins but because it had just emerged that AMP specifically misled ASIC in hiding the fact that, as recently as a year ago, it was deliberately continuing to charge fees to clients who, in many cases, no longer even had an adviser.
Once or twice? No, about 20 times, stated Hodge, who not surprisingly had the commissioner’s full attention every time he counted the deliberate misrepresentations.
It’s an irony that Regan got his nickname from the John Thaw character in the 1970s British police drama The Sweeney about Scotland Yard’s Flying Squad.
One deathless quote from the thoroughly ruthless television cop came as he bounced a reluctant witness off a brick wall and explained that, “We’re the Sweeney and we haven’t had our dinner.”
At the royal commission hearing, this particular Jack Regan wasn’t so much having his dinner as being someone else’s.
The point is that any attempt to conceal information from the commission, particularly in relation to events since the supposedly client-friendly Future of Financial Advice legislation became law on July 1, 2013, is going to get the full spotlight treatment.
Especially since ASIC has surprisingly limited powers to clamp down on large organisations ignoring its requests, as Kell pointed out. That’s why the regulator has to rely on those amazingly arch “enforceable undertakings” instead, in which the miscreant organisation never seems to admit any blame. Stand by for changes to that state of affairs, to be recommended in due course by the commissioner.
Hiring an outside organisation to perform a so-called independent investigation is not going to fly either, unless it is genuinely independent.
Regan got a towelling over the fact that a report by lawyers Clayton Utz into ‘fee for no service’ was put in front of the AMP board for amendment, which included taking out the name of chief executive Craig Meller.
“Why would the board be accepting changes to an independent report?” Hodge asked, rhetorically. He didn’t do the trick with his fingers of putting inverted commas round the word independent but he might as well have done.
The thing to note about royal commissions is that the punchiest statements tend to be made just as the day’s hearings are winding up. When it’s a witness, it’s because the prospect of a large gin may have clouded their usual circumspection. But when it’s the commissioner, it’s lapidary stuff, a clear warning of the focus to come. In military terms, it’s the rising sound of tank engines in the distance.
At the end of Tuesday, the commissioner noted that, “In view of the evidence given by Mr Regan, there may be some question about what conclusions, if any, I may reach about the extent to which senior management or others associated with AMP sought to influence or did influence content of the report by Clayton Utz, apparently submitted to ASIC as an independent report.”
Getting back to inverted commas, a Fairfax Media report this week put inverted commas around the phrase financial adviser, which tells you all you need to know about the level to which the industry’s reputation has now been dragged.
As Kell inarguably put it, “The financial advice industry cannot yet be regarded as a profession.”
Much of the background material about adviser malpractice is so well known now that it doesn’t have much impact, but it still gets a public airing, usually by Orr, to remind the many watchers that many innocent people lost their life savings due to malfeasance. For instance, by being switched into high-risk products despite specifically asking not to be, as many were, just in time to be carted out by the global financial crisis.
Then there was the couple who were persuaded to buy so much insurance cover as part of their SMSF that the wife’s modest $11,000 super balance would disappear completely within the policies’ first 12 months.
It sounds like the old definition of a stockbroker as the person who takes your money and invests it until it’s all gone.
That’s stockbroker read ‘financial adviser’, and there will be plenty more pain for them before these hearings are over, deserved or not.
