Kenneth Hayne’s final report from the royal commission has finally been released to the public detailing 76 recommendations to overhaul the financial services sector.
Here’s what the main takeaways were.
1. No criminal charges
In a move that may disappoint the royal commission’s most vocal supporters, the final report levelled a sum total of zero criminal charges.
It did, however, refer 24 instances of bad corporate behaviour to the regulators, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
“Those include Colonial First State (which is owned by CBA), OnePath (which was owned by ANZ) IOOF, AMP, NAB, Suncorp and a series of Suncorp businesses, CommInsure, Allianz and Youi to name most of them,” Your Money chief business reporter Leo Shanahan told Your Money Live.
“It’s also important to remember that the royal commission can’t refer anything that is already an ongoing investigation so a lot of the fees-for-no-service investigations against NAB, AMP etc.”
That could mean that some of the worst behaviour seen may be eventually punished in court even if the final report didn’t propose charges.
2. Overhaul of mortgage brokers
While the government was quick to say it would act on all 76 of the final report’s recommendations, there may be an issue with mortgage brokers in particular that it rejects.
“The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending,” the report recommended.
If implemented that would mean no more trailing commissions which had previously seen mortgage brokers get paid for years after they had negotiated a mortgage.
The report suggested a two-to-three year timeframe over which these commissions would be done away with.
However, while this reform would be one of the most significant, it is the one that the government would most likely water down.
Research suggests that consumers would not be willing to pay an upfront fee in lieu of a commission bundled into a mortgage and there is concern that in losing brokers you lose competition.
It could also inadvertently make the thousands of mortgage brokers employed in Australia redundant.
3. Abolition of multiple default superannuation accounts
The final report left no sector untouched, delving into Australia’s almost $3 trillion superannuation industry.
While there has been no shortage of proposals to improve the sector, this one may be the first to be implemented in an overhaul:
“A person should have only one default account. To that end, machinery should be developed for ‘stapling’ a person to a single default account,” the report recommended.
“That’s important because it puts an individual’s money all in one pot and it’s not dispersed, getting eaten up by different fees,” Shanahan said.
Deduction of any advice fees from a MySuper account will also be prohibited, removing more fees that are eating away at compulsory super.
4. Scrapping heavy-handed selling
As testimony from a disabled victim’s father showed, a sales-focused structure can lead to horrific outcomes- in this case, a man with Down syndrome being sold more than $100,000 worth of policies he couldn’t understand.
One of the major overhauls recommended by Hayne would be the abolition of hawking insurance products or superannuation.
That should translate to no more heavy-handed selling strategies or cold-calls.
That, combined with a cap on insurance commissions for add-on products, would go hand in hand to stop the kind of aggressive tactics the insurance public hearing heard.
5. Establishment of new oversight authority
One of the most damning conclusions drawn from the public hearings was the failure of the regulators to prevent and penalise misconduct.
A new independent authority will oversee APRA and ASIC to maintain pressure on the two to do their job.
ASIC meanwhile will be instructed to overhaul its enforcement, with an emphasis on court action rather than the simple issue of infringement notices, noting transgressions.
Whether that will prevent a repeat of the transgressions seen throughout the royal commission remains unclear.