Industry Super Australia is intentionally misleading consumers with a scare campaign against financial advisers, according to two of Australia’s largest financial services associations.
The Financial Services Council (FSC) and the Association of Financial Advisers (AFA) have both hit out at the ISA for issuing a report which claims the Future of Financial Advice (FoFA) amendment regulations re-introduce commissions for financial advisers.
The report, titled ‘Commissions by another Name’, was released to mainstream media by the ISA last week, and highlighted how the Government’s FoFA regulations had reintroduced sales incentives and commissions for financial advisers.
The ISA report contends that the FoFA regulations, which were formally submitted to Parliament on 26 June and registered on 30 June (see: Cloud Hangs Over FoFA Requirements), contain nine loopholes and caveats that allow commissions to continue to be paid.
In a statement accompanying the report, ISA CEO, David Whitely, said: “When you analyse the fine-print, it is clear that the banks’ lobbying has been successful and they will once again be able to pay incentives to financial advisers to sell their products.”
“Financial advisers cannot act as impartial advisers and receive sales incentives from banks.
“Once again, people seeking financial advice will need to wary of being sold something as well,” he said.
But the FSC and the AFA have countered the ISA’s argument, calling instead for the ISA to cease its campaign of inaccurate statements.
Consumers are more protected than they have ever been under the FoFA law
In its response, the FSC said it was concerned about the document, and listed ‘the real facts’ in relation to the ISA’s claims.
“Consumers are more protected than they have ever been under the FoFA law,” said FSC CEO, John Brogden.
“Australia’s FoFA legislation is being used as a global benchmark because there is nothing anywhere else in the world that comes close to it in terms of consumer protection. The FoFA amendments support this position.”
The AFA went further in its criticism of the ISA, saying the report was a ‘compilation of fairy tales from a vested interests group’.
“The AFA is tired of inaccurate statements being propagated by the ISA in the market place,” AFA CEO, Brad Fox, said.
“It is an absolute fallacy that commissions and new sales incentives have been introduced for financial advisers by the FoFA amendments. The ABC Fact Check team, for example, has expressed a very clear view about the inaccuracies of that argument. The recent announcement from ASIC calling for industry super advertisements to be amended adds further weight.”
The AFA believes that the ISA’s deliberate and repeated use of the terms ‘financial adviser’ and ‘financial planner’ in their media releases, along with the publication of the latest report, is potentially designed to misrepresent the benefits payable to financial advisers providing personal financial advice.
“Much of what the ISA has argued is simply impractical in reality as it asserts examples that are either uneconomical or are contrary to the basic rules of running a financial advice or financial services business. It is also important to appreciate that commission paying superannuation and investment products will no longer exist for financial advisers.
The ISA has acted to discredit and damage the public perception of financial advice
“The ISA has sought to raise extreme scenarios for how conflicted payments could eventuate and fails to consider two important protections: firstly, the anti-avoidance provisions and secondly, the additional powers that the Government is seeking to ensure that action can be taken against any financial services business or financial adviser who tries to get around the law.”
The AFA and the FSC cautioned media outlets, commentators, politicians and the public not to accept the ISA’s claims without independent verification.
Mr Fox added: “The ISA, over many years, has acted to discredit and damage the public perception of financial advice and financial advisers. What is required is for all parts of the financial services community to work together to ensure that consumer confidence and trust in financial advice is enhanced.”
You really have to wonder exactly what the ISA is so afraid of. It’s not like the advice profession is laced with advisers facing court and investigation every day ( well non bank advisers anyway) .
If both sides of government are fair dinkum about reform, how about making it illegal for manufacturers to be involved in distribution.
We could see the following 1. Banks divesting themselves of their (majority) stake in funds management and insurance companies or 2. Having to be forced into using the “independent” advice network. There are probably some more alternatives but they seem most obvious to me.
I have maintained from day one that the dealer groups model was I’ll conceived and poorly implemented. All it did was corral advisers into institutionally aligned ( for the most part) distribution channels.
There are APL’s out there that are so transparently biased toward the parent company ,it’s a wonder that ASIC have not made them change their restrictive behavior. It is the adviser that cops the flak for not offering alternative ( best interest) product offerings.
Getting back to the ISA , it seems to me that this is a grab for the hearts and minds of the Australian consumer, and a desire to create some utopian landscape where everyone has the same low target, vanilla result.
As for the My Super life stages solution, what a joke. it would be like the government deciding that depending on our age you can drive one of 5 different cars throughout your life because you should all be having children, getting married, retiring and the like at predetermined stages. This is not freedom of choice or self determination, it’s like a communist inspired centrally controlled society where everyone has the same as everyone else. Believe me this will all end in tears.
Mathias Corman summed it up very well the other day when he referred to industry super as the commercial arm of the union movement.
Hopefully he carries through with his threat to apply the same outrageous levels of over regulation to industry funds.
Banks pushing their own products… where is the best interest?
Unions pushing their own products…. where is the best interest?
The political push, pull factor is at play to the detriment of the public. Consumer confidence is shot as the industry is so complex and the ISA and left winged journalists just make it up as they go along joining the scare mongering labor greens party!!
Its a sad state of affairs when we are dealing with peoples life savings. This is the BBQ topic for 2014 and beyond.
Seems to me that the “true” independent advisers who are licensed via non-institutionally aligned arrangements are the only avenue where compliance is met, best interest duty is observed, and the public can be served as they rightly deserve.
“….Mr Fox added: “The ISA, over many years, has acted to discredit and damage the public perception of financial advice and financial advisers. What is required is for all parts of the financial services community to work together to ensure that consumer confidence and trust in financial advice is enhanced…..” Yes you are right Brad…
AFA and FSC please do your duty and inform the public – spend our membership fees on prime time advertising space and correct this message. You are our industry reps, now go and represent your membership!
The main stream public do not read weekly money magazines, online industry info, read the Fin Review or watch the ABC fact Check segment. The public do listen to radio and watch TV at night – hello…..its a no brainer which is why compare the pair/iselect/and union super adds are run at this time!!
“Seems to me that the “true” independent advisers who are licensed via non-institutionally aligned arrangements are the only avenue where compliance is met, best interest duty is observed, and the public can be served as they rightly deserve”.
Please remind me which dealer group Storm Financial belonged to? Before you make sweeping statements, how about some due consideration. There are good financial planners out there who work within various ownership/licence structures and to make such unfounded statements simply sinks to the level of those who attack our industry.
By the way, Storm’s business model was fee based (nil upfront commission) so work that out!!
This “tug of war” between industry funds and retail funds is nothing new How far back can you go with the “compare the pair” advertisements {years and years} W hen this first started was the time we should have had our say ! spent some money on the radio and TV and refuted with evidence the garbage that was being peddled by the industry funds. Now that it has a firm hold are we are now just waking up to the impact it was having. I for one have been for some counter promotion and voiced it for many years with not a “peep” out of our associations. Come on we cannot sit back forever. Approach your local member have him or her voice our disgust in parliment on this blantant grab for premium dollars to spend on more tv promotion rubbishing a establishment that needs to be on the same level as our clients Accountant or Solicitor. It gets harder and harder to show your value and true professionalism to your clients when you keep getting kicked in the n %#@& by these uncareing “scaremongers”
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