The final report from the Hayne royal commission into misconduct in financial services is out, and it recommends an end to commissions to mortgage brokers, a ban on hawking of superannuation, tightening of the remits of the regulators.

Commissioner Kenneth Hayne says in his introduction that “the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those
who managed and controlled those entities: their boards and senior management. Nothing that is said in this Report should be understood as diminishing that responsibility. Everything that is said in this Report is to be understood in the light of that one undeniable fact: it is those who engaged in misconduct who are responsible for what they did and for the consequences that followed.”

The report recommends a complete ban on the “hawking” of superannuation products and says changes should be made to the superannuation system so that a person can only have one default fund. “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 says.

It also recommends the phasing out of commissions to mortgage brokers, saying there should be a “steady but deliberate movement towards changing the existing remuneration arrangements for brokers, so that the borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending.

He said changes in “brokers’ remuneration should be made over a period of two or three years,” with trailing commissions to go over the first 12 to 18 months, and other commissions to brokers being phased out over the next 12 to 18 months”.

“Lest there be any doubt about it, my intention would be that the fee payable to a broker in respect of advising about, procuring or negotiating loans after that date would be payable by the borrower, and, if the lender agrees, could be paid out of the principal sum advanced to the borrower under the loan agreement,” Hayne says. “How the fee is fixed is best left to the market to determine. It could be a fixed amount, a stepped fee, a value-based fee or some combination.”

Among its key recommendations are clarifying the missions of the prudential regulator APRA, and the corporate regulator ASIC, to ensure they have clear accountability for policing misconduct in financial institutions.

We’re looking through the report now but one key recommendation is that in the case of ongoing fees, they must be:

• renewed annually by the client;
• must record in writing each year the services that the client will be entitled to receive and the total of the fees that are to be charged;
and
• may neither permit nor require payment of fees from any account held for or on behalf of the client except on the client’s express written authority to the entity that conducts that account given at, or immediately after, the latest renewal of the ongoing fee arrangement.

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