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Editorial: Advisers could gain from a royal commission

A royal commission would not be pretty but at least it would see those actually responsible for the industry’s conflicts – and not advisers – brought to justice.

Having been through more inquiries and witch hunts in the past few years than almost any other industry, most financial advisers understandably bristle at the prospect of a royal commission.

True, it would probably arm the industry’s enemies with ammo and in the short term may even further wound it’s reputation.

But on the flipside, such an inquiry could also serve as a process of catharsis after a very difficult couple of years, and could result in blame finally being placed at the feet of the fat cats that created and perpetuate vertical integration, not their so-called ‘distribution force’.

The problem with all the inquiries we have already had is that they either focus narrowly on advisers – education and professional standards for example – or on the overall state of the financial system.

The Ripoll Inquiry and subsequent FOFA wars did look at the elephant in the room, but they resulted in legislation that was more focused on fee disclosure than ownership disclosure i.e. focused on advisers, not what ASIC calls their ‘controllers’.

We are yet to have a meaningful process that gets beyond blaming advisers to look at the structural impediments to sound advice – the executive bonuses, volume rebates and soft dollar incentives we all talk about over beers and know continue to exist in the major institutions.

You only need to look at Bill Shorten being implicated by the Royal Commission into Trade Union Governance and Corruption to realise the great benefit of these types of inquiry.

Compared to run-of-the-mill parliamentary inquiries, an independent probe of this kind would have greater powers to compel the insto advice bosses to face the stand and explain that they have traditionally seen advisers as nothing more than a salesforce, rather than as a professional class of client-centric advisers.

With IOOF now being added to the list of major advice providers under the regulatory microscope, calls for a royal commission from both sides of politics are getting louder and there are signs that even Coalition MPs – traditional advice allies – are beginning to flip on this issue.

For too long, advisers have been blamed for product failure and dodgy incentives implemented further up the chain.

Almost all of the industry’s problems were created in skyscraper boardrooms, not streetfront advice practices.

A royal commission would be painful, but it may ultimately be necessary to expose the truth once and for all and begin the process of rebuilding consumer trust.