Over the past couple of months Hedge Clippings has been overwhelmed by revelations of gross misconduct evident at a number of levels of banks and AMP in the areas of financial planning and advice. The Hayne Royal Commission became a cross between reality TV, a soap opera, and a big end of town version of Judge Judy.

This week's episode, focusing on banks lending to small businesses, and their subsequent treatment of the borrower and their unfortunate guarantors when the proverbial hits the fan, has been dull by comparison.  It has been no less shocking, but dull, probably because there haven't been too many surprises. Banks only lend when the borrower can provide adequate security, and when it's time to pay the piper, it's the lender that calls the tune.

There's an inherent conflict here. Small business borrowers constantly complain that it's hard to get a business loan, even with the security of a home as collateral, often owned by some unfortunate relative. Banks argue that they aren't there for the benefit of the borrower, and have been driving hard bargains when things turn turtle since Shylock was a boy. Hence the term "getting their pound of flesh."

The issue is to what lengths should a bank go to in getting a guarantee, and how, or from whom in the first place. Once again it is in the area of what is "acceptable conduct" from a supposedly reputable business that the banks appear to have failed the test. No one disputes the banks' basic business obligation to take appropriate measures to protect the money they lend, but it comes down to what is considered appropriate.

Once again the pressure to perform, particularly to meet sales and lending targets, leads to unfortunate outcomes where the bank is rarely the loser at the end of the day. Until the government of the day announces a Royal Commission…

The AMP saga continues.

The latest casualty was the resignation of AMP's Chief Risk Officer, which is probably understandable given the revelations of the past month or so, although his comments on LinkedIn were, let's say, "unconventional".

Geoff Wilson from Wilson Asset Management, one of the most experienced fund managers around, publicly questioned whether AMP was a buy at any price, given not only the internal and governance problems that the company is facing, but with a business model out of step with the times, and a business sector that is guaranteed to have unknown regulatory changes imposed on it in the future.

Added to anecdotal evidence of AMP advisors moving out, in line with an industry trend from "big end" to "boutique" this week Macquarie Bank is reportedly moving up the wealth management food chain to focus on HNW investors - a further indication that financial advice for "mums dad's" is not an attractive place to be going forward.

Given ASIC's hard line on advisor commissions, and particularly training commissions, that's probably as true for the adviser as it is for the recipient of the "advice". Whether it is the place to be or not, it is an issue for the retail investor who needs and deserves proper financial advice.

Hedge Clippings looks forward to the dismantling of the vertical integration, tied distribution, and producer heavy Approved Products List model to the day when investment products stand on their merits, not product sales dressed up as advice. However, in spite of the headlines, and the fundamentals behind them, it is worth remembering it is the minority of advisors who are the problem, aided and abetted by the industry structure and poor corporate governance that allowed them to operate that way.

The danger of the Hayne Royal Commission will come from the risk of an over-reaction from politicians, and subsequently regulators, and thus to corporate compliance departments, to the extent that the end consumer will go without the genuine advice that they need. Next week the Commission moves its focus to the small business sector - away from the small investor being delivered products they don't need or want, to small business that need the products, but all too often can't get them!

Meanwhile, APRA is starting to put pressure on industry superannuation funds and their selection of board members without the requisite financial acumen, or rather non-selection of board members from outside the industry with appropriate experience. We don't know whether this will come under the gaze of the Hayne Royal Commission, but if not it should do. With their control of so many trillions of dollars of small investors' retirement funds, the governance, skills and experience required should be no different to a public company board.

Finally onto global markets. So far the S&P500 seems to be defying the 10 year bond market yield, now trading at a tad under 3.1%.

So far ... but watch this space.