Details emanating from the past fortnight of the Adele Ferguson-instigated banking Royal Commission had the nation’s headline writers and cartoonists stretched to keep pace with an extraordinary run of revelation, confession and a collapsed witness hauled off to hospital by ambulance.
They had much to work with. With the indomitable Justice Hayne methodically logging reams of daily evidence and testimony, secured with clinical precision by counsel assisting Rowena Orr and co, the number of apologies and frank admissions ratcheted up an alarming perception that this was a sector bitterly struggling to contain its darkest secrets.
Yes, commissions were taken from the policies of deceased clients. Yes, our compliance systems were inadequate…and so on.
Not surprisingly, the media’s florid headlines, negative adjectives and puns portray what we know is a primary ingredient of all news product – conflict.
Conflict, of almost any nature, outpunches all other news stories. If it bleeds it leads, is a well-known maxim that describes this phenomenon. The consequence of the conflict will now become a round two priority of editorial meetings in business section newsrooms.
What is the conflict here? It is not so much conflict or the disparity of power (breach of trust) between customer and adviser/organisation – though that was one wholly disturbing and frankly sad element.
To my mind conflicted is the operative word.
Make no mistake, Australia’s unique ecosystem of wealth management and financial advice business models are on trial – right down to the nuts and bolts of embedded fee structures within seemingly innocuous portfolio administration services charging 20 basis points for portfolio efficiency and administrative accuracy.
(Note to industry: surely by now it is reasonable to assert that a Managed Discretionary Account, or IDPS or even an SMSF is not, technically speaking, a product. It’s a tax structure. Or at least a service structure. It might help for someone to explain this simple but important point of view to the lawyers when accused of flogging investment product).
Back to conflict. The questions now for the wealth industry at all levels, are: what’s next? Is this the end of the “Hayne pain” (as one media outlet described it) or just the beginning?
It’s just the beginning. And it’s been a long time coming. Careers and reputations, both personal and organisational, are on the line. But so are the underpinnings of parts of the sector. Vertical integration (aka bancassurance) is under threat.
The very term ‘financial planning’ is entrenched now as a byword for structural corruption – the same label it attracted over two decades ago during the first shadow shop exercises.
For now, the media blood sport of ‘who’s next?’ will commence.
This week, the corporate casualties include the high-profile departure of AMP Chair, Catherine Brenner and AMP legal counsel Brian Salter. These followed the previous hurried exit of former CEO Craig Meller.
But, seriously, from a bigger perspective of sector-wide reputation recovery and trust restoration, we all know that this is not predicated on the number of symbolic heads that roll.
It is about genuine contrition. Making tangible and enduring change. Righting the wrongs. Doing what is ethically and morally right. Moving before the regulators come asking questions or threatening their enforceable undertakings.
I caution anyone reading this post who sniffs an opportunity for personal or brand gain to do one thing: wait.
It is simply premature to provide the answers to what are entrenched, and complex issues being scrutinised by the Royal Commission. Jumping in now – ahead of the findings of the Commission – to public solution mode is foolhardy.