For a royal commission that had less than a year to investigate three major sectors, commissioner Kenneth Hayne’s spotlighting expedition has looked into some interesting corners.

While there has been much noise in the last couple of days about mortgage brokers and embarrassed big four bank executives and directors, it’s been salutary to see what other strange Rube Goldberg string-and-wire arrangements the retired High Court judge found himself examining.

Super industry unscathed

The superannuation industry is relatively unscathed by his report, although there are a few new landmines for it to look out for.

The “no hawking” rule that’s been brought in to get rid of insurance cold calls has also been brought to bear on super products, thanks in part to the big banks having recently put a toe in the water and offering superannuation products at the retail level.

The commission is also proposing a specific ban on super fund trustees having divided loyalties.

“The trustee of a Registrable Superannuation Entity should be prohibited from assuming any obligations other than those arising from or in the course of its performance as a trustee of a superannuation fund”, the report states.

What’s making the commissioner nervous here is the possibility of trustees and employers being leaned on or incentivised to park new employees in specific default super accounts.

Hayne wants to see a change to the wording of the Superannuation Industry (Supervision) Act of 1993, which currently bans trustees and their associates from offering goods or services to a person “on the condition that one or more of the employees of this person will be, or will apply and agree to be, members of the fund”.

He’s made it more specific to doing dodgy things to get people into default funds. Bear with me, as this is important.

He recommends that trustees and associates now be banned from offering any of those benefits “where the act may reasonably be understood by the recipient to have a substantial purpose of having the recipient nominate the fund as a default fund, or having one of more employees of the recipient apply or agree to become members of the fund”.

‘One default account’ conundrum

The commissioner now wants to see individual workers getting “one default account”, rather than a mishmash of individual accounts and their accompanying multiple insurance policies.

That’s a good idea but it will cause some angst among the industry funds, which currently enjoy an institutional advantage via their ability to nominate default funds as part of enterprise bargaining agreements.

Let’s assume there’s another shoe to drop on that one.

Simplifying the arcane

A key thread in his surprisingly comprehensive report has been his desire to simplify and clarify some of the arcane arrangements in financial services that might have helped some of the vendors but kept many of the clients firmly in the dark about who’s representing whose interests and what’s covered by the Corporations Act of 2001’s supposed consumer protections under the umbrella definition of “financial products”.

Did you know, for instance, that funeral insurance is not classified as a financial product? Or that the handling and settlement of insurance claims or possible insurance claims is not classified as a “financial service”?

You have to ask yourself, if they are not a financial product and a financial service, respectively, then what on earth are they?

All of which suggests that some canny lobbyist managed some years ago to negotiate a carve-out from some looming piece of legislation and it’s sat there ever since.

Which could explain why, for instance, you get unsolicited phone calls from people who are only just out of their teens offering you funeral cover that, if your affairs are even half decently organised, you will never need.

Opaque mixed loyalties

There are two things in financial services that Hayne clearly hates: carve-outs and intermediaries who misrepresent or conceal their mixed loyalties.

The latter is most probably why he has suggested that mortgage brokers should be paid by the borrower rather than the lender, a proposal that is the only one of his 76 recommendations that the Coalition Government is reluctant to take up.

You can see his point. That way, the retail borrower knows what they are up for and who is providing them a service. But the brokers squeak that their business will be hard hit as borrowers blanch at the prospect of paying several thousand dollars now to get a cheaper mortgage going forward. Hayne’s point is that in paying the broker, the borrower knows who is representing their interests.