“The evidence is quite strong and the public is entitled to be sceptical that the banks will ever resolve this problem. Even if there’s a short-term behavioural improvement [from the Royal Commission], it’s difficult to supervise long term and there is a real chance that it will lapse. Separation should be an issue the Royal Commission addresses very directly if it’s to stamp out this behaviour.” The comments came after several days of scandalous evidence at the commission. Nationals Senator John Williams, who pushed strongly for the establishment of the commission, said the evidence had disgusted him and vindicated his position. Nationals senator John Williams has lashed AMP over its testimony. Credit:Alex Ellinghausen "AMP admitting lying more than 20 times to ASIC, charging people for financial advice when they never got it. What the hell is going on? The people of Australia see that as just a blatant rip off," he said.

He said the inquiry should be "done properly the first time" and that should mean extending the reporting deadline beyond February if that was required. Liberal MP Warren Entsch said there needed to be a mechanism for compensation following the commission. Treasurer Scott Morrison having previously dismissed Opposition Leader Bill Shorten's push for a royal commission as a "populist whinge", described the AMP revelations as "deeply disturbing". Certain conflicts of interest aren’t managed and it seems to have been getting out of hand in the financial services sector Allan Fels Mr Morrison said the Australian Securities and Investments Commission (ASIC) was already investigating the conduct and would decide whether to pursue penalties against AMP, which could include potential jail time for responsible executives.

On Wednesday morning, AMP was forced to deny it had "trapped" clients in high-fee and high-risk investments. That was followed in afternoon by Commonwealth Bank executive Marianne Perkovic facing accusations Australia's biggest bank had unlawfully waited two years to admit similar conduct to the corporate regulator. Appearing exasperated, Counsel Assisting the Commission Michael Hodge, QC, accused Ms Perkovic of "dissembling" in her evidence. Commonwealth Bank executive Marianne Perkovic, outside the Royal Commission. Credit:AAP Professor Fels said the deeper problem in the industry was the inherent conflict created by having the same bank both manufacture a product - like an insurance or superannuation product - and then also employ financial advisers to provide advice to customers on whether to buy such a product. A recent review of such “vertical integration” by ASIC found that while banks’ products represented just 21 per cent of products on approved lists for their financial planners to recommend, 68 per cent of client funds ended up invested in such in-house products.

“There is a lack of knowledge of consumers of what’s going on,” Professor Fels said. “Even in a competitive industry, certain conflicts of interest aren’t managed and it seems to have been getting out of hand in the financial services sector.” In the early 2000s, Fels, as head of the ACCC, gave the greenlight for a wave of takeovers by banks of wealth management businesses. Professor Fels said competition laws did not equip him with the powers needed to block such mergers. Professor Allan Fels. Credit:Alex Ellinghausen Professor Fels was also critical of "long-term cultural issues" at the corporate regulator.

“It needs to exercise its powers more vigorously, with more court action and fewer undertakings," he said. “They have not had a long-term culture of vigorous law enforcement. They have improved but they’ve still got quite a long way to go.” Kevin Davis, a member of the 2014 financial system inquiry panel, said the royal commission might recommend putting limits on the types of financial services businesses that could be owned by a single corporation. Specifically, he said it may consider caps on "vertical integration", which refers to banks owning businesses that both create and distribute financial products to customers, and "horizonal integration," the ownership of related businesses, such as a bank owning an insurer. Professor Davis, research director at the Australian Centre for Financial Studies, said such restrictions would be a "big step" and he was not necessarily supporting such a change.