Royal Commission | Cowell Clarke Lawyers

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On 4 February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its highly anticipated Final Report. The central task of the Royal Commission was to inquire into, and report on, whether any conduct of financial services entities amounted to misconduct and whether any conduct, practices, behaviour or business activities fell below community standards and expectations. The straight answer is yes.

General rules

  1. the law must be both applied and enforced;
  2. industry codes should be approved under statute and any breach of a key promise made to customers in the codes should be a breach of statute;
  3. no financial product should be 'hawked' to retail clients;
  4. intermediaries should act only on behalf of, and in the interests of, the party who pays the intermediary;
  5. expectations to the ban on conflicted remuneration should be eliminated; and
  6. culture and governance practices (including remuneration agreements), both in the industry generally and in the individual entities, must focus on financial and non-financial risk.

The Report

Financial Advisers

The Report states that there is no justification for maintaining grandfathering provision, and therefor, recommends banning grandfathered commissions for financial advice and life insurance products, and repealing grandfathered provisions for conflicted remuneration.

Both mortgage brokers and financial advisers commonly receive a combination of upfront and trial commissions: upfront commissions when the product was sold, and trial commissions in subsequent years. Between the years of 2008 and 2018, the financial advisers providing advice at three out of four AMP's advice licensees obtaining their highest source of revenue from ongoing of trial commissions.


One overarching theme recurred: the difficulties that trustees faces in dealing with conflicts between duty and interest. The Report makes a number of recommendation that have capacity to disrupt the superannuation industry. These include:

  • Fund members entering the system should only have one default account, this strives to bring an end to fee-draining multiple accounts.
  • No deduction of advice fees from MySuper accounts and prohibits hawking of superannuation products.
  • Maintain exceptions to the general hawking prohibition, at least in respect of superannuation and insurance products.

Culture and Supervision

The Report recommends that all financial services entities should take steps to:

  • assess the entity's culture and its governance;
  • identify any problems with that culture and governance;
  • deal with those problems; and
  • determine whether the changes it has made have been effective.

So what's next?

While the Government has stated that it will 'take action' on all 76 recommendation made in the Report, it is important to remember the federal election will occur this year and expected to be held in May.

With limited sitting days for Parliament left before then, it is likely that most of the recommendations will not be legislated on before the upcoming election. Therefore, whether the recommendations are implemented through legislation, and what form they eventually take, remains to be seen.