The royal commission and the damage done

Published 25 May 2018

When the royal commission ends I will have a new job for Kenneth Hayne. I am going to pay him to record Australian poems for me to listen to. Not the modern poets like Murray and Wright, but Patterson and Lawson who, all things considered, are pretty terrific.

I want him to read poetry because I like listening to his voice, which appears to be constructed of equal parts whisky, gravel and honey, and I can hear him rolling through “The Man From Snowy River” – the tension, the doubt, the victory – and he brings all of that to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

I tend to listen to the royal commission while I am working. I’m used to the enquiring lilt of Rowena Orr (who will soon be cast in Blade Runner 3 as Sean Young’s daughter) as she slowly unpicks her witnesses, and the lazy dry lilt of Michael Hodge (soon to be cast as a baby-faced assassin in some future crime movie) as he removes the confidence of his witnesses brick by brick; but I’m always pleased when Ken has something to say, alternately playing the thinly veiled role of Puck or a thinly veiled Prospero.

Frankly I expect him at the end of the commission to say: “Our revels now are ended”, in his summing up. In fact strike that – I will donate $1000.00 to the charity of his choice if he says: “Our revels now are ended” somewhere in his summing up.

But, on to the misquoting of Neil Young in the title of this article.

Here at CoreData we spend our time fascinated by how consumers are behaving. We are kind of lucky, or at least I am lucky, because it’s our job and our hobby.

We are lucky too because we get to watch humans through great events, like the GFC and now the royal commission, and we get to measure how they react and behave, and we track this.

We can do this because we’ve invested huge amounts of money in our consumer databases – Hunter and Bligh and professional database Anubis. You can look at them here (www.hunterandbligh.com.au and www.anubisdata.com) which means we can take the pulse of Australians very quickly.

So we do. Because we enjoy it and it’s interesting.

So every fortnight we have been pumping out a survey to the database to find out what people are thinking about the royal commission and the banks, and watching how the data is changing. And we get to compare it to the same research we did in 2014 when the Retail Distribution Review kicked off in the UK (but more on that later).

This time we wanted to understand if Australians were engaged in the royal commission (do they care?). Is it impacting what they think of the industry; is it going to change the way they think about the industry; and what has the industry done about it?

If you want a copy of the research, email me: I’m easy to find at [email protected] and I’m happy to share the data.

But here’s the summary:

Mass affluent and high net wealth individual (HNWI) Australians (we are only researching people who earn more than $90,000 a year) really care about the royal commission: 89 per cent of them are taking an active interest; more than 98 per cent of them think that the royal commission is necessary and the more they read about what’s been happening the less they think of the industry; 56 per cent of them state they have changed their perception of the industry to the point that its altering their behaviour; and 18 per cent of them have changed something in their relationship with their bank.

Hang on to that number in your head for a moment.  Let’s just say this is working or retired Australians, of which we think there are about 16 million. If 18 per cent of them say that they have changed their relationship with their bank that’s 2.8 million people changing their relationship. Ouch. That’s going to hurt.

It’s not only damaging the present, it’s also damaging the future: 50 per cent of the people that responded to the survey say they are less likely to get financial advice after listening to the royal commission. The data on this is pretty clear: the more engaged they are in listening to the commission, the less likely they are to get advice.

There is some slightly pleasing news for the industry in the data. Just under half the sample of the people who have a financial adviser have heard from their adviser. In 70 per cent of cases it’s been by email and in 30 per cent of cases by phone.

85 per cent of the people found the contact reassuring, but all of the people who were contacted via phone were reassured.

There’s a clue to everyone everywhere: phone people, tell them what is going on and what it means to them. They like it.

The royal commission is far from ended. Superannuation is yet to come, and that’s going to bloody interesting if they even get close to what is happening, and that’s going to do some real damage, I would imagine.

However, I have faith in Ken. I see him like the Man from Snowy River in the second last stanza, astride his mountain pony (this is from memory so may be wrong – but you get the point):

“And he ran them single handed, till their sides were white with foam,
He followed like a bloodhound on their track,
Till they halted cowed and beaten, then he turned their heads for home,
Alone and unassisted he brought them back.”

So on we roll with the royal commission, until the entire industry is bloody from hip to shoulder, but frankly, industries like banking are a bit like an old man’s arsehole. They need to be inspected periodically by experts because the consequences of failure are spectacular and, to put it mildly, messy.

Andrew Inwood

Founder and Principal
Andrew Inwood is the founder and principal of CoreData and has more than 30 years’ experience in the Australian financial services industry.