The big four banks are preparing for the financial services royal commission but is it a damp squib before it's started? A once-over-lightly inquiry will make it difficult to get to the heart of the issues and restore confidence. From the get-go the royal commission, led by former High Court judge Kenneth Hayne, hasn't done itself any favours by issuing a statement discouraging anyone who has signed a gag order – customer or employee - from filing a submission relating to misconduct or poor behaviour. Given this is the standard of the industry, it stops a lot of good evidence coming through. The reality is customers who have been dudded and whistleblowers who have exposed wrongdoing are the best placed to help the commission identify patterns and themes. All the commission needed to do was ask financial institutions to waive confidentiality agreements and it would have avoided a public backlash. It took Senator John Williams to see the problem and ask the banks to waive confidentiality agreements. Now the rest of the sector needs to follow suit.

Former High Court judge Kenneth Hayne will lead the royal commission. Credit:John Woudstra If they don't, Senator Williams warned, he would set up a Senate inquiry to receive evidence under parliamentary privilege that he could then pass on to the commission. The take out, whether right or wrong, is Senate inquiries have more clout than a royal commission. That's bad PR. The first hearing will be held on Monday and Hayne will have no option but to address the issue about the commission's advice regarding non-disclosure agreements. It is something that should have been dealt with weeks ago. Relying on the banks to provide a scorecard of wrongdoing isn't full proof. The big four banks were asked to send the commission a list of misconduct and failures to meet community expectations. This is all well and good but it isn't fool proof. Over the years banks and other financial institutions have been caught not keeping the Australian Securities and Investments Commission informed about scandals, so why should the royal commission think it is any different? To meet the tight deadline set by the commission and do the sector justice is a gargantuan task.

A once-over-lightly inquiry will make it difficult to get to the heart of the issues and restore confidence. But it is little surprise. When Prime Minister Malcolm Turnbull announced the royal commission late last year he said it was "regrettable". Former prime minister John Howard described it as "rank socialism". It didn't help the optics that Turnbull had announced a royal commission within hours of receiving a letter from the banks pleading for an inquiry. It raised the question: Who is leading who on this? The banks or the government? A royal commission is something Fairfax Media has been calling for over the past few years after exposing a string of scandals. Toxic culture, kickbacks, criminal behaviour, management cover-ups and the damage done to people who lose their life savings at the hands of unscrupulous financial advisers or have their life insurance claims rejected, have been laid bare in forensic detail. In some cases laws have been changed, there have been half-hearted mea culpas from the CEOs but the scandals have continued to roll on. Bank bill swap rate rigging, CBA's Austrac money laundering scandal, fees for no service and misconduct among payday lenders, mortgage brokers, general insurance and stockbroking.

A common thread is a questionable culture of profit at any cost. Over the years this has been allowed to fester through limited accountability. Despite the financial planning scandals at CBA and NAB, which uncovered some egregious behaviour by financial advisers, including forgery and fraud and people financially ruined, little seems to have changed. On January 24 the corporate regulator issued a report into how large financial institutions manage conflicts of interest in financial advice, assessing the big four banks and AMP between 2015 and 2017. It showed that little has changed, despite the introduction of laws that banned commissions. It found 75 per cent of planners aren't acting in clients best interests, which is a breach of the law. It found that, overall, 79 per cent of the financial products on the firms' approved products lists were external products and 21 per cent were in-house products. However, 68 per cent of clients' funds were invested in in-house products. It seems the institutions and advisers had learned nothing about conflicts of interest. The royal commission needs to find out why this is the case.

It also needs to address the effectiveness of the regulators in doing their jobs, which is a big topic in its own right. Given the short deadlines and broad terms of reference this will be challenging. The royal commission was meant to put the blowtorch on the industry, identify the issues, and rebuild confidence in a sector that is reeling from public mistrust. The hope is that as the federal election campaign cranks up commonsense will prevail and the commission will be granted a time extension, a bigger budget and a welcoming mat for people to come forward without fear of legal retribution to air the issues. If not, it will be another inquiry with a set of recommendations that does little good.