Commissioner Kenneth Hayne stopped short of recommending advice be pulled from the country’s largest financial institutions, but the reforms he suggested in his final report will aim to continue the change that’s already been forced on the wealth industry.

Hayne has recommended new rules be put in place to give clients the upper hand in their relationship with advisers, both in terms of the fee arrangements they enter into and the disclosures they receive.

He also put regulators on notice to hold institutions and individuals to account and has suggested another review in three years (no later than December 2022) to ensure the new rules take hold.

Hayne has decided not to remove the ‘safe harbour’ provision – a carve out from the best-interests duty under the Future of Financial Advice legislation – but he has suggested it be repealed in three years if a review at that time finds conflicts within the advice industry have been allowed to fester.

Specifically, Hayne has recommended responsibility for renewing agreements be put into the hands of clients, not advice or investment firms – a recommendation the final report outlines in depth.

Also, when it comes to disclosure, advisers will need to outline more simply and succinctly where their conflicts of interests lie.

Overall, Hayne has used the final report to amplify his findings from the interim report that financial advice has fallen short of being able to call itself a profession.

“The industry has moved from scandal to scandal, causing financial harm to clients, and damaging public confidence in the value of financial advice. This cannot continue,” he noted.

Hayne’s final recommendations focused on solving three main issues identified during the almost 70 days of hearings and through more than 10,000 written submissions.

The first was “fees for no service”, specifically the charging of ongoing advice fees when no advice was given. The second is that clients have often been given poor advice that has left them worse off than they would have been if proper advice had been given and the third is the fragmented and ineffective disciplinary system for financial advisers.

“…I do not believe that the practice of giving financial advice is yet a profession. The general weight of the evidence given to the Commission by those involved in the industry was to the same effect. Some said it is on the cusp, others were, perhaps, more cautious,” he said.

Vertical integration: the heart of the issue