Clockwise from top left: Kenneth Hayne, Jack Regan, Marianne Perkovic and Ian Silk

Having been privileged to sit in the courtroom and adjacent media antechamber for much of the testimony of the Hayne royal commission – and seen first-hand the seismic admissions of guilt and greed – the final report itself in February 2019 was initially underwhelming.

In fact, I went on telly that night to criticise Hayne and his team, declaiming that “bank spin doctors would be popping the champagne” over the report.

It still rings true that the 76 recommendations were lacklustre compared to the fireworks of the evidence provided. But five years on, it is equally true that the inquiry has left a lasting legacy, at least within the industry if not within the public discourse.

While many within the financial services industry – especially those most commercially affected – bristle at these reminders and want to keep the conversation forward-looking, we believe there are key lessons that are at risk of being forgotten and which, left unheeded, could result in another disaster. Here are our top five.

  1. The news cycle and Canberra circus can move quicker than the market

Asked how regular voters now feel about the royal commission, Minister for Financial Services Stephen Jones told the Investment Magazine Chair Forum last week it was a “distant memory for many”.

The banks themselves were quick to announce their exit from the market, all at once looking as though they were responding to “community expectations” while also freeing themselves of the regulatory regime their misdeeds would trigger. While they are – to varying extents – still exposed to wealth management in reality, the public and political perception is that the Wexit was swift and severe.

They then went on to enjoy immense public and mainstream media praise (perhaps justified) shortly thereafter during the so-called Team Australia relief measures during the worst of the Covid-19 pandemic (though successive interest rate rises may have dented this goodwill).

Either way, the banks themselves expertly responded and then fled the scene. Meanwhile, the financial advice and life insurance industries were left to try and navigate the waves of often duplicated rules and regulations that would follow.

Listed wealth manager share prices continue to act as a crude commercial barometer, with AMP and Insignia each down by more than 55 per cent over the five years since the reckoning. The moral of the story is that, while voters and the news cycle may seemingly move on quickly, the institutional memory of the market is not always so fickle.

  1. Be sceptical of external advice

The commission rightly focused on regulated entities – the financial services providers with whom consumers actually engaged. They are the entities that hold fiduciary or contractual duties and should therefore be held accountable for their own behaviour.

But it does not absolve these players to point out the often unspoken truth that much of the misconduct in question was actually carried out, devised or recommended by third-party advisers such as management consultants and lawyers.

For example, blue chip law firm Clayton Utz played a starring but unaccountable role in AMP’s infamous conduct of lying to the regulator over its fees-for-no-service practices. An “independent” report provided to ASIC  by the firm was actually the product of 25 drafts and 700 email exchanges with management, with which they had many commercial and interpersonal ties.

Prominent management consulting firm McKinsey & Co received just one mention in the interim report and none in the final report. The reference was from a submission by researcher Ross Waraker, who argued the firm was responsible for inspiring the so-called “bad banks” strategy that led the big four to riskier activities. Though it has not been proven, many industry sources suspect McKinsey played a role in devising the vertically integrated wealth model implemented disastrously by groups like Commonwealth Bank, led by former McKinsey consultant Ian Narev for much of the period in question.

Ironically (and typically) the consulting firms (especially the big four of PwC, KPMG, EY and Deloitte) picked up much of the work in post-Hayne remediation and new processes. They have since come under immense scrutiny themselves but remain a go-to option for executives looking to outsource tough decisions. They should remember they were somewhat of an elephant in the room during the Hayne inquiry.