Royal commission is getting it right

Given that the Australian taxpayer has handed Commissioner Kenneth Hayne more than $70 million to conduct his inquiry, it is more than reasonable that we are all anxious to see it well spent.

Sceptical analysis of the royal commission’s own behaviour – its lines of questioning, choice of witnesses and, of course, final verdict in due course – is warranted. Concerned citizens and quality journalists should of course be scrutinising the examiner as well as the examined.

But much of the criticism from within the financial services industry so far (often provided off record over beverages rather than in the form of public statements) has been a little rash, and the royal commission has so far, in ifa’s assessment, proven to be as fair as it could be, given the enormity of the task.

A common criticism ifa often hears whinged by industry executives is that the focus of the commission has been on historic conduct and that the institutions questioned have already made the requisite cultural changes and new regulations (such as FOFA) have addressed the underlying issues.

Well, that’s not entirely true. Much of the misconduct tendered as evidence actually occurred within the past couple of years.

But even if the majority has been from more than five years ago, if it has not come to light among the general public, then we say it’s still fair game, in the same way that when they find a new sarcophagus while digging at Luxor, it’s news.

The most common criticism has been that the commission has been biased against the big banks and silent on its warring tribes such as industry super.

Yes, the royal commission has focused primarily on the big end of town. But that was its very intention. ASIC has shown itself incapable in recent years of holding the financial giants to account or even forcing them to provide truthful information. Only a widespread, independent inquiry with prosecutorial power has finally been able to instil the necessary fear into the powerful and deceptive.

Moreover, the commission has hardly been unwilling to look at misconduct at SME level, as we saw with the unfortunate testimony of Henderson Maxwell.

Now, as those more patient observers assumed was always going to be the case, the commission has announced it will be looking specifically at conduct by the industry super sector, picking up where the Royal Commission into Trade Union Governance and Corruption left off.

In setting the scene this morning, counsel assisting Michael Hodge QC made clear that it was willing to wade into some truly thorny subjects, including trustees’ financing of political lobby groups like Industry Super Australia and controversial advertising and marketing campaigns.

For too long, ISA has been using member funds to attempt to weaken its political and commercial enemies, with attack ads such as last year’s shocking ‘fox in the hen house’ campaign - with little to no questioning by the mainstream press as to whether this is in members' interests.

The commission has also announced it will examine the establishment of The New Daily, a digital news venture owned by Industry Super Holdings, which has consistently had a pro-ISA and anti-SMSF leaning in its coverage.

Given this is just one of many issues on the agenda, the commission will likely only touch the surface of this grubby world of payments to football stadiums and racing associations and political parties.

The business of industry fund marketing and political lobbying could probably merit its own royal commission, but at least the spotlight is finally being shone where it needs to be.

Of course, the commission will also be looking at retail funds and the egregious cases of funds-for-no-service and misleading product information that has long plagued bank-owned super.

It is fair and appropriate that it look at both sides of the super culture wars and ensure that compliance with the sole purpose test is paramount.

So far, it has looked up to that task, taking on the role of ‘fox herder’ and making clear it is not going to be swayed by the talking points of either side, but instead focused broadly on the problems inherent in compulsory superannuation. 

We will, of course, reserve final judgment for the final report (and the worrying role that politicians will then play in their response). But overwhelmingly the royal commission is doing good work in the public interest.

In two weeks' time I wonder whether the industry funds will agree.

Follow live coverage of the royal commission superannuation hearings at https://www.investordaily.com.au/superannuation/43410-royal-commission-superannuation-hearings