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RC’s soft stance on vertical integration ‘a missed opportunity’

Meg Heffron
Miranda Brownlee
08 February 2019 — 1 minute read

With the recommendations in the final royal commission report lacking in major structural reform, an SMSF services firm has questioned whether it goes far enough to restore trust for consumers.

Heffron SMSF Solutions head of product Meg Heffron said that while the hearings that took place as part of the royal commission sent shock waves through Australia’s major financial institutions, the final report was “light on major structural reforms” in relation to advice and restoring trust for the thousands of individuals saving for retirement.

In the final report, Ms Heffron said that Kenneth Hayne devoted quite a few pages to exploring the issues surrounding vertical integration, where a single organisation offers financial structures and products such as bank accounts, platforms and managed funds as well as licensing or employing financial advisers.


“The opportunity was there to recommend that product and advice to be structurally separated in some way,” Ms Heffron said in an online article.

“He could have proposed that product providers, such as banks, simply be prevented from owning advice businesses or licensees. Alternatively, he could have recommended that there was a clear demarcation between those who sold products produced by their employers or licensee, who are not called advisers, versus those who are genuinely advising without any link to a particular product.”

Ms Heffron noted that the UK system operates in a similar way to this.

The final report, she said, did not recommend that product and advice be separated.

“The only change is that those who are not classified as independent will have to explicitly remind their client of that fact. But this is a blunt instrument,” she said.

“While Hayne acknowledged that changes here were likely to reduce conflicts, he felt that the resulting disruption would outweigh the benefits. I’m not convinced.”

The lack of structural reform recommended in this area, she said, does not sit well with some of the “explosive revelations” in the hearings themselves.

“There are some conflicts that must surely be impossible to manage and disclosure will never be enough,” she said.

Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years. 

Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: This email address is being protected from spambots. You need JavaScript enabled to view it.

RC’s soft stance on vertical integration ‘a missed opportunity’
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