Many in the finance industry might be breathing a sigh of relief now that another bruising fortnight at the banking royal commission is over and done with.

Once again, bankers and fund managers were put on the stand and asked to explain why they charged fees for no service, or kept dead people on their list of active clients.

Of note, late last week the commission heard clients who invested their super entirely in cash with AMP subsidiary NM Super could in fact go backwards financially because the fees charged on their accounts exceeded the return on their cash investment.

All of these practices date back to the start of the century and have survived several attempts at reform.

But does the blame for "fees for no service", and excessive fee charging more generally, rest entirely with the banks?

Analysts argue consumers need to take a more active interest in what they are being charged and why.

Serious problem with financial literacy

But before that can happen, there is an acknowledgement Australia has a serious problem with financial literacy.

"It's quite frightening really," University of New South Wales' Business School professor Pamela Hanrahan said.

Most people can relate to the frustration of not being able to figure out a mathematics problem.

But Professor Hanrahan say too many Australians cannot make basic maths calculations.

"All of the studies indicate that there's a significant portion of people who can't, for example, work out what 10 per cent of 100 is equal to."

It also causes us a great deal of stress.

A 2017 survey launched by the Australian Securities and Investments Commission (ASIC) revealed more than a third of respondents said dealing with money was "stressful or overwhelming".

Royal commission highlights system failures

Professor Hanrahan said that was why the law around financial advice was designed to be as user-friendly as possible.

"So we set up a system that says we don't expect you to be an expert in this stuff," she said.

"We will license a group of people to whom you can go and ask for advice, and that advice is supposed to be given in your best interests.

"So you don't need to understand this stuff because you can go and see an expert adviser and they'll help you with it."

Sorry, this video has expired AMP super under fire at the Royal Commission for poor returns.

What the banking royal commission has revealed over the past few months though is that, while that should work in theory, it ignores the conflicts of interest facing advisers.

Some advisers, for example, are given financial incentives to offer certain products to their clients — regardless of whether they will be in the client's best interest.

They also wrestle with the ethical dilemma of how much to charge clients.

Take the example we heard last week involving NM super, where clients who invested their super entirely in cash with the AMP subsidiary could in fact go backwards financially because the fees charged exceeded the amount the fund handed back in cash.

Here's a transcript of the interaction between counsel assisting Michael Hodge and NM Super chairman, Richard Allert, at the royal commission on Thursday:

Hodge: "Your point is why are they foolish enough to invest their superannuation with AMP?" Allert: "(laughs) … no that's not what I'm saying at all." Hodge: "But isn't that your point?" Allert: "You have to ask the client what's in their mind when they put money into a cash account, and as you've pointed out, this person has had a cash account with AMP at least from March 1, 2014 to February 28, 2018. They've left the cash there knowing the return they're getting."

Despite obvious breaches of the law, it's clear from the past several months of royal commission hearings that both bankers and their customers have come unstuck as a result of poor financial decisions.

Professor Hanrahan said fund managers claim they believe the clients understand the financial arrangements they enter into, and, equally, clients say they believe their fund managers have their best interests at heart.

Both, as we have discovered, could be misguided about those beliefs.

"It's fine for us to legislate, you know, hundreds of pages of law that require people to get all this information, and then say 'well maybe people should be more careful, or they should have higher levels of natural literacy', and so on," she said.

"But the real difficulty is that because the system is complicated to navigate, because it involves lots of different parties who charge lots of different fees, that people really rely on their advisers to give them appropriate guidance about what all this disclosure actually means for them."

That may go some way to explaining why fees for no service has existed for so long.

Professor Hanrahan traces the practice back to the start of this century, adding that not even the Future of Financial Advice (FOFA) reforms were able to overcome the problem.

In 2015, ASIC began a project to review the extent of the problem, making inquiries to AMP, ANZ, CBA, Macquarie, NAB and Westpac.

The watchdog even released a report on its findings in October 2016, and provided updates the following year.

But still the practice of charging fees for no service remained.

Fees easy to miss

Andrew Page runs the online investment research platform Strawman — a peer support network where investors can share their war stories.

He said he was not surprised the practice has been so difficult to stamp out.

"It seems really bizarre but the reason it can go on untracked is that it's not directly coming out of your wallet," Mr Page said.

"It's not directly being debited from your bank account.

"It's usually charged as an administration fee on your insurance product, or on your superannuation fund, as an annual fee.

"A lot of us will give that a sideways passing glance once a year and don't think about it, and as is coming out at the royal commission, it's something that's become quite prolific."

Banks respond

RN Breakfast asked all four major banks to provide some reassurance that each was no longer charging clients fees for no service.

The CBA said in a statement that "these mistakes are unacceptable. We apologise to our customers for letting them down and have taken action to avoid the issue occurring again".

The ANZ also offered a response.

"We have looked into this matter thoroughly in recent years to ensure our affected customers have been compensated appropriately," its statement read.

"We have also put processes in place within our ANZ Financial Planning business to ensure it doesn't reoccur."

It's not a lost cause

What this points to is a need for better quality disclosure that's more useful for people, that they can understand what they're paying for more clearly.

"That's still a work in progress, and has always been really difficult for government to manage," Professor Hanrahan said

"And I think this is reminding everyone to read their statements when they arrive and make sure that they understand all of the deductions that are coming out of their account, and if they've got any concerns about it they need to follow-up."

So where to from here?

Well the final report from the royal commission will be handed over early next year … and will make more recommendations to the regulators about how to tackle the problem.

But ASIC has already told Australian Financial Service licensees they must be transparent with each client about why they are receiving remediation.

ASIC says the licensee should explain to each client how the amount of compensation was calculated and the client may complain to the licensee or adviser if they disagree with it.