As we approach the five-year anniversary of the release of the Hayne Royal Commission final report, it will be a time to reflect on the impact of the Royal Commission and the lasting consequences for the financial advice profession.
No doubt we can all recall the particularly uncomfortable media coverage of Commissioner Kenneth Hayne handing the final report to the Treasurer Josh Frydenberg on Friday 1 February 2019, when Hayne refused to shake hands with the Treasurer or even smile. You can only assume that this was part of a deliberate strategy to force the Government to take immediate action.
And that was exactly what we saw, with the Government releasing their response just three days later on Monday 4 February 2019 in what can only be described as "record-breaking" time.
The consequences for the reputation of the financial advice profession were drastic and deeply disturbing. I recently read a 2019 research paper by a couple of academics which stated that “the Financial Services Royal Commission (2019) describes advisers as generally under-educated, unprofessional, providing poor advice, having poor ethics and conflicted remuneration."
In reality, it didn’t say these things, and it was not possible for the Royal Commission to conclude these things as it was a Royal Commission looking into misconduct. It had no interest in looking at good conduct or clients who got good advice. During the two weeks of hearings in April 2018 where financial advice was the focus, only one adviser appeared on the stand and only 10 advisers were the subject of case studies.
The data collected through the enormous powers available to a Royal Commission concerned 10 years of reported misconduct (i.e. breach reports). How does this enable a Royal Commission to conclude anything about the many highly-educated and very ethical advisers who make up the important profession of financial advice? How does this provide any insight into the huge impact they make on the financial and emotional wellbeing of so many Australians?
Nonetheless, the impact of the Royal Commission was huge and continues to have substantial ongoing consequences. Media will often – rightly or wrongly – refer to the humiliation of the advice profession at the Royal Commission. Is this accurate and fair? How do you think the Royal Commission impacted the reputation of the financial advice profession?
I guess that we can now look back on this as something in the rear view mirror. The environment has certainly changed significantly since that period, even though the impact and consequences will linger for a long time. What are your reflections on this phase in the life of the advice profession?
Of course, the Royal Commission recommendations are another matter entirely; some of them have added greatly to the cost and complexity of running an advice practice. That is another story.
Advisely Partner