The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry interim report, released on September 28, addresses the critical issues of how the level and extent of misconduct across the industry arose in the first place, and what now can be done to prevent it from happening again.

It generalises the factors behind the misconduct as being dishonesty and greed. It says it is fundamentally dishonest to charge for doing what you do not do, and that it is equally dishonest to give advice that does not serve the client’s interest but profits the adviser.

And whether the motive for such behaviour is characterised as “greed”, “avarice” or “pursuit of profit”, the report says the conduct ignores basic standards of honesty, and that its “prevalence and persistence” mean a close look must be taken at industry culture, regulation and structure.

The interim report covers the inquiry’s hearings into consumer lending, financial advice, lending to small and medium-sized enterprises, agricultural lending and financial services delivered to remote communities.

The absence of definitive or even draft recommendations means the likely recommendations of the inquiry’s final report, to be delivered in February 2019, remain unclear. However, after less than 10 months of operation, the inquiry has highlighted a broad range of issues and its interim report provides a number of useful signposts as to its thinking – as well as a set of useful principles for all participants in the financial services industry.

Why did it happen, and how to stop it happening again

The report says all financial services entities over time allowed selling to become the focus of their activities, and too often the sole focus of attention. As products and services proliferated, and banks competed for “share of wallet”, success was measured in terms of sales and profits.