I am hereby joining the conga line of commentators and captains of the banking industry who now admit they were wrong to say we wouldn’t need a Royal Commission into the Banking system. 

I took that position back in November on the basis that surely the vast bulk of the bad news was already out in the market, and that there wasn’t a common thread of villainy running through from insurance, through money laundering, to dodgy advice.

I wrote in this column to explain my view that “Cock-ups and inept evasions? Yes, they are legion, but conspiracies are much thinner on the ground.” 

Boy, how wrong I was. What better word is there than conspiracy to describe what happened (didn’t just possibly happen) when our best known and respected life insurer AMP lied to ASIC not once but 20 times over a period of years to conceal the fact that it was charging clients for advice they weren’t getting? Until about a year ago! 

It always looks like an excuse when you try to justify getting something so wrong but as I look back, I never would have imagined that the management at AMP could have been so obtuse as to do all that obfuscation.

This was in a situation where as I understand it, regulator ASIC had been at them for two years, with 18 reviews conducted and literally thousands of pages of documents. We also know that AMP finally reported itself to ASIC on the issue in May of last year. 

What we don’t know is exactly how much of this AMP ‘fessed up to before the proceedings began, but that’s just history now. It’s out in the open now, its full horror displayed, and the last year appears to have been spent by Australia’s longest established and best known life company in attempting a cover-up.

I’ve been watching the Royal Commission and I dips my lid to the very canny way its hearings have been put together. 

I had assumed that it would be difficult for the Commission staff to run what is effectively a two layer inquiry, one looking at the institutions and one examining  case studies of bad advice to individuals,  but it’s all now looking like a maelstrom of often criminal behaviour .

The common thread has been that clients have been put at the absolute bottom of the pile, after being relieved of startlingly sized annual insurance premiums made up mostly of startlingly sized commissions to advisers offering startlingly bad advice. 

How on earth can a Westpac adviser tell a potential SMSF trustee that they can buy a Bed and Breakfast establishment to run themselves, and park it in their SMSF? One of the central tenets of the SMSF regime is that you can’t put your home into an SMSF, which was the clients’ plan. 

I was concerned that we were going to be listening to a lot of legal wrangling about dealer groups, platforms, structures and reactions to complex legislation, which can usually be relied upon to send listeners to sleep.

Instead of which, the Commission has assembled what is almost a charge sheet  based on all the most easily understood atrocities and fired them out in one brain- addling salvo, like one of those old Russian truck mounted rocket launchers, for us to contemplate in the cold, clear light of day.

Charging “orphan” clients an annual advice fee when their adviser has left or otherwise moved on? That was the AMP wheeze which to date has seen the company’s Chief Executive Craig Meller fall on his sword, and that will absolutely not be the end of it.

Please note that the in house counsel, former Clayton Utz partners Brian Salter, has gone “on leave” pending the outcome of the proverbial review of what went on, and it was a supposedly “independent” report by Clayton Utz that was massaged by AMP staff before being presented to the board.

Then there’s the CBA wheeze of charging advice fees from dead people, based no doubt on the knowledge that few executors will be able to identify exactly what payment has gone where, and why.

So, where is it all going to lead?

There’s a lot of talk that the vertical integration model is going to be banned: if a bank or insurer is devising a financial product there’s a lot of logic in putting  tight controls between them and the organisation that sells the product. 

But if it does get dismantled and the Big Four banks and AMP find they can’t still keep their Wealth Management businesses, there’s going to have to be something else allowed in its place. 

Given the complexity of our superannuation system, it’s just not realistic to expect people to make their own arrangements. 

So, who are they going to trust? Robo-advice has one massive advantage in that it’s not conflicted, but it will only work in the most plain-vanilla sets of financial circumstances. Accountants are only allowed to advise on the setting up and dismantling of SMSFs and around 70 per cent of Australia’s licensed financial advisers have a connection of one sort of another to the banks. 

It’s not quite the proverbial omelette but it will still need quite a lot of unscrambling. Clearly the financial advisers will have a role to play, as they should, and the sooner they separate themselves from any obligation to recommend any specific products to their clients, the better. 

And I haven’t even started on ASIC. To judge by the fact that they were comprehensively stonewalled by AMP despite knowing there was a problem with fees being charged for no advice, tit looks as though couldn’t do a lot. 

It’s clear there was a shortage of enforcement powers available to them aside from demanding restitution of the affected clients, which they have done.

They can also disqualify people from the industry, not that we’ve seen much of that in this case, they can demand Enforceable Undertakings and they can start civil proceedings with a view to getting people banned. After which, in many cases, the miscreants persuade the Administrative Appeals Tribunal to overturn the banning order.

But what they can’t do is basically charge people. That’s a job for the Director of Public Prosecutions, which has a limited budget in deciding which cases to pursue.

ASIC raises about $700 million a year in licence fees and fines, which is significantly more than it costs to run. It ‘s all very well increasing the potential penalties for breaches of the law, as Treasurer Scott Morrison has just announced, but what is really needed is for the regulator to be able to launch more criminal actions in the first place.

Nothing, absolutely nothing, appears to focus the minds of corporate types so much as a prospect of going to jail. Six months or five years? It doesn’t greatly matter. The cell door makes the same metallic noise as it closes.