Hayne commission reveals systemic issues in advice

The interim report noted that a running theme through all of the issues relating to culture and incentives are questions about how industry participants are paid, including how bonuses and other incentives are calculated.

Another theme identified by the report related to conflicts of interest and duty, and the confusion of roles, including issues about FOFA’s treatment of conflicts of interest that can, and should be, managed.

However, the report said it goes further, requiring a consideration of the structural issues that surround financial advice.

“In particular, the second theme draws attention to consequences that appear to be related to, if not stem from, some entities being vertically integrated, in the sense that the entity manufactures and sells financial products while, at the same time, advising clients which products to use or buy,” the interim report said.

“And the second theme also embraces the issues that emerged in the first round of hearings about the confusion of roles and responsibilities of, for example, mortgage brokers and aggregators.”

The last theme identified relating to financial advice was the effectiveness of the regulators.

In particular, attention was directed to what responses regulators can make, and what responses regulators should make, to conduct of the kinds examined in the commission’s hearings.

A necessary part of the second branch of that inquiry is to consider whether the responses that were made have proved to be satisfactory.

Other questions posed in the interim report include whether grandfathered commission provision should be changed and, if so, how far they should be changed and when those changes should take effect.

In addition, the Hayne commission asked whether the acknowledgement of specific wrongs be a component of enforceable undertakings.

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].