The Financial Advice Industry? Exercise Care..

Respected business columnist and author, Adele Ferguson, reports that all it takes to qualify as a financial planner is an eight-day diploma known as RG146. After the sector has been shown to be riddled with ‘fraud, forgery and low education requirements’, with thousands of customers falling victim to bad or ‘inappropriate’ advice, just what is the situation?

Inherent Conflict Needs To be Addressed

Today, with our banks having moved into wealth management and financial planning, the industry is more than 80 per cent owned or tied to the big four banks and AMP. Adele says:

“The current structure of vertical integration is inherently conflicted and customers don’t realise that many of the financial planners are owned by the banks..

The conflicts of interest …are akin to allowing a pharmaceutical company to own doctors who are partly remunerated by the pharmaceutical company; and that company ascribes certain targets, such as the number of pills and which brands the doctors must sell..

Conflicts of interest need to be properly resolved.”

A National Register Of Financial Planners

Plans are afoot for a national register of financial planners. Hopefully this will be operational early in 2015 and will help to:

“clean up an industry described by the corporate regulator as one that ‘really has to change’ and that has raised ‘alarm bells’ for years…

Education, ethics and the ability to properly track a planner in terms of who they are and where they work will help clean up an industry that has been mired in controversy for years.”

NAB Ahead In Setting Standards Of Education For Its Planners

NAB has announced it will require its planners:

• to have a relevant degree and either an advanced diploma in financial planning or be working towards one
• All senior planners will have to be a certified financial planner (CFP) from the Financial Planning Association or if working towards one, complete it within three years
• Existing financial planners will be required to obtain the CFP by 2017 or complete a Masters and CFP by 2019

All of this goes much further than some of our other financial institutions.

Senate Committee Recommends FOFA Amendments Bill Be Passed

The Committee notes that:

“while some stakeholders had expressed concerns about the new SoA requirements the Committee was satisfied that the intent of the measures was sound, adding that the Government will need to ‘carefully monitor the implementation of the new requirements’ to ensure they operate efficiently and effectively.

The Committee also acknowledged Senator Cormann’s efforts to ensure that the exemption of general advice from the conflicted remuneration rules would not lead to the reintroduction of commissions.”

Education, transparency and caution needed here…