Assessment Task on Ethical and Social Responsibility of Financial Advisers

The following paragraphs are taken from Vol 1 of the Final Report of the Royal Commission
into Misconduct in the Banking, Superannuation and Financial Services Industry.1

“The proposed changes to lift the professional, education and ethical standards of
financial advisers represent a further important step towards making financial advice
a profession. Once these changes have taken effect, it may be possible to ask again
whether the financial advice industry has truly changed from an industry dedicated
to the sale of financial products to a profession concerned with the provision of
financial advice.

In the next three sections of this chapter, I deal with three matters that will need to
be addressed before the provision of financial advice can truly be regarded as a
profession.

First is the charging of ‘fees for no service’. As I said in the Interim Report, charging
for what you do-not-do is dishonest. ……………
Second is poor advice – which, too often, is the result of the conflicts of interest that
continue to characterise the financial advice industry.
Third is the disciplinary system for financial advisers.

. While ASIC now has the

power to ban financial advisers from providing financial services, the existing
disciplinary arrangements for financial advisers are fragmented, and hampered by
inadequate sharing of information. …………..
Two different solutions present themselves. The first is to have advisers act as sales
people and be clearly identified as such. The second is to have advisers act as
professionals. Past reforms have favoured this second course, and it is now too late
to undo those reforms. Even if it were not too late, it is the course that I favour.
Leaving the sale of complex financial products entirely to intermediaries who have
no obligation to act in the interests of customers is likely only to lead to further poor
outcomes for consumers of financial products. It will also leave Australians without
access to financial advice. While finishing the transformation of financial advice to a
profession will take time and effort, it is not impossible.

1Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry,
© Cwlth of Australia 2019, Ch. 1.7 pp.134 – end of Ch.1 and all of Ch 2 . This report is commonly referred to as “The Hayne
Report”.
 I therefore turn to consider the three matters that I believe will need to be
addressed before the provision of financial advice can truly be regarded as a
profession.”2

Mr. Justice Hayne concludes on page 163:

“The heart of the matter is this: if a financial adviser and a client want to enter into an
arrangement under which the client agrees to pay fees on an ongoing basis, the
arrangement:

• must be renewed annually by the client;

• must tell the client clearly what fees he or she will pay, and what services he or she
will receive in exchange for those fees; and

• must not permit or require the deduction of fees from any account held by the client
except with the client’s express written authority, which must also be renewed
annually.

Those requirements should apply to all ongoing fee arrangements, whenever made.” 3

INSTRUCTIONS TO STUDENTS

1. This is an Individual Assignment.

2. The assignment will be submitted through the Turnitin link to check for copying and
plagiarism.

3. The assignment is a maximum of 2 pages in length and will be submitted

electronically in Week 9.

4. This assignment is worth 10% of your total mark for FINS3630.If you do not submit
an assignment you will attract a mark of ZERO and may be excluded from the
Course.

5. Your task:

a. Read from Vol 1 of the Final Report of the Royal Commission into
Misconduct in the Banking, Superannuation and Financial Services Industry
from pages 133 to 164 (Referred to as “The Report” below). This will
describe Justice Hayne’s report on the ethics of Charging Fees for No Service

2
“Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry”,
C of A, February 2019. (See Ch. 1.7 pp 134 – 135)
3
Ibid p.163
 by Financial Advisers many financial services groups such as in a bank, ADI,
or other related financial services group etc.

b. Without copying or other forms of plagiarism, explain the three main points
made in Justice Hayne’s Report of Charging Fees for No Service and why they
are unethical and lacking in social responsibility. (3 marks)

c. Using sources other than Vol 1 of the Final Report of the Royal Commission,
state at least two critiques of Justice Hayne’s conclusions on page 163 of The
Report and indicate why you have chosen these critiques. Please cite your
sources carefully in footnotes. (5 marks)

d. Summarise your position in a final paragraph balancing the strengths and

weaknesses of The Report’s recommendations against the views of critics
that believe Hayne’s recommendations are not strong enough. (2 marks)

e. Further instructions will be given in Week 8 about electronically posting in

your assignment.

THE END
The following URLs are some of the more common references to the Hayne

Report:

https://ethics.org.au/initiatives/the-banking-and-finance-oath/

https://www.investmentmagazine.com.au/2018/09/hayne-report-to-push-new-ethical-
standard/

https://www.corrs.com.au/thinking/insights/beyond-the-banking-royal-commission-9-key-
implications-of-the-hayne-report-for-corporate-australia/

https://aicd.companydirectors.com.au/resources/royal-commission

Authorized by Vic Edwards

Lecturer in Bank Financial Management FINS3630

Dated 19/03/2019