May 15, 2018
The AFA has challenged the negative perceptions of the value of financial advice it claims were present at the recent hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
In a submission to the Commission, the AFA stated that while it was clear from the terms of reference that the purpose of Commission was not to look at good advice “…it is also apparent, from some of the questions that have been asked, that there is a lack of appreciation of the value of financial advice”.
The AFA pointed to recent research from Sunsuper which found that people who had received advice felt more financially confident, had greater control over their financial future and were better prepared for retirement.
“…it is also apparent…that there is a lack of appreciation of the value of financial advice”
The submission added the financial advice sector contributed to the Australian economy by ensuring people had life insurance protection, greater retirement income and contributed to investment in the corporate sector via money placed into superannuation and managed funds.
The AFA also pushed back on the suggestion the advice profession had a culture of protecting poor practitioners, stating “the financial adviser community wants to see those advisers whose advice or ethics does not meet public expectations removed from the industry and therefore ensuring that the community trust prevails and encourages more people to seek financial advice”.
“The broad community of ethical advisers is viewing what has happened at the Royal Commission with anger and dismay,” the submission continued, adding “…that culture and risk management systems have emerged as key issues with respect to wrong doing”.
The AFA suggested that any further reforms should address poor culture and inadequate risk management systems, including the ability for advisers to move licensees when issues arise around their conduct and the quality of their advice, or when a licensee seeks to lift its own standards for advice and conduct.
“The broad community of ethical advisers is viewing what has happened…with anger and dismay…”
“As a sector, the capacity for advisers to move to a lighter touch licensee is a known issue. The complication of this is that to achieve the overall objective of raising the quality of advice, it is important to increase the standards across the sector and remove the possibility for advisers to find a place where lower standards are permitted,” the submission noted.
In an effort to make this happen, particularly across a financial advice population that was not homogenous, the AFA suggested the creation of an umbrella body to oversee widespread changes that would apply to all providers of financial advice.
“One of the key issues with the financial services industry is that it has been driven by sectoral issues…This might have held back internally developed solutions and deeper research into identifying and fixing fundamental issues,” the submission stated.
“We therefore propose a role for an umbrella cross financial services industry oversight body that can take a non-partisan view in addressing embedded issues and to drive more consumer-focused outcomes,” the submission added.
“Such a body could be led by an eminent chair and participation by representatives of the sectors that are selected for their big picture thinking, consumer driven perspective and a commitment to industry wide improvement. Such a body could hold the industry more accountable.”