Kenneth Hayne

There are four key things that organisations should consider to help them avoid repeating the issues that caused the undermining of trust in financial services that led to the Hayne Royal Commission, according to the eponymous man behind the inquiry.

Speaking at the International Congress of Actuaries in Sydney on Tuesday, Kenneth Hayne identified the connections between the four key pillars of conduct and reward, asymmetries of power and information, conflicts between duty and interest, and how entities are held to regulatory account.

“[These are] useful to examine when considering how any commercial enterprise is organised and operated,” Hayne said, adding that they also help to identify various forms of risk that the enterprise is facing.

The concepts also tie in to the “six fundamental norms of conduct” Hayne identified in his final royal commission report: obey the law; do not mislead or deceive; act fairly; provide goods or services that are fit for purpose; deliver goods or services with reasonable care and skill; and when acting for another act in the best interests of that other.

“Now, each of [the fundamental norms] is widely accepted, well established, easily understood,” Hayne said.

“Of course, all of them will find some reflection in the law, but expressed in the form in which I have, they may provide a more useful framework for judgment than simply saying that an enterprise must obey the law.”

Hayne added that, too often, “the applicable law is found in many different places and there is a tendency to become lost in the woods”.

“You become immersed in the details of the law without first focusing on the basic norms of conduct that underpin a particular legal provision and also reflect what customers and society more generally expect of enterprises.”

Balance of power

The Quality of Advice Review sprang from one of the royal commission’s recommendations and the Minister for Financial Services Stephen Jones is expected to deliver a response to the review in the coming days.

Advice review lead Michelle Levy has copped criticism for her proposals, with those against the reforms arguing they risk the return of conflicted advice models.

The proposals have the potential for institutions, like super funds, to give more advice which could include on their own products.

At the congress, Hayne spoke of the imbalance between the power dynamics of a customer and the supplier of a product.

“If a customer seeks advice from a supplier about what would suit their needs best, have you ever encountered a case where the supplier has ever gone beyond saying ‘my product at my price is best for you’?” Hayne said.