Do you support the eleven recommendations made by the Ripoll Inquiry?
- Support some, not all (71%)
- Yes (19%)
- No (10%)
- Not sure (0%)
The Ripoll Inquiry recommendations have been enthusiastically welcomed by industry representative bodies this week, but what are individual advisers saying about the future of their industry?
Our simple poll question is:
Do you support the eleven recommendations made by the Ripoll Inquiry?
We have detailed the eleven recommendations below, recommendations that the AFA has welcomed as ‘… the dawn of a new era in financial advice’, and the FPA has also welcomed as ‘… sensible and practical.’
Early adviser responses have focused on the remuneration issue (Recommendation 4) with a range of views:
“The simple solution to remuneration to advisers is easily set. All ASIC have to do is set the maximum that can be charge in any product or purchase of a product via the PDS.”
“If fees/commissions are capped at the PDS level, to say the 4%, this will stop the storm/timbercorp debacles”
“When will it be realized that the current system works…. complaints seem to be coming from those that operate outside the regular system (and products)”
“The issue isn’t so much the cost of the fees, but the advice that was given to generate the fees”
Bernie Ripoll MP, Chair of the PJC Committee Inquiry into Financial Products and Services, told riskinfo that he believes his Committee’s aims of greater clarity and simplicity for the industry have been achieved, particularly in the recommendation to make it the legislated, fiduciary responsibility of the adviser to place their clients’ interests ahead of their own.
Mr Ripoll also emphasised to riskinfo the imoprtance of considering the eleven recommendations as a package, where the non-implementation of one or more of the recommendations may have an adverse impact on one or more of the other recommendations.
What is your view? Make your voice heard by voting in our poll and also adding your comments below:
The eleven Ripoll Inquiry Recommendations are:
Recommendation 1
The committee recommends that the Corporations Act be amended to explicitly include a fiduciary duty for financial advisers operating under an AFSL, requiring them to place their clients’ interests ahead of their own.
Recommendation 2
The committee recommends that the government ensure ASIC is appropriately resourced to perform effective risk-based surveillance of the advice provided by licensees and their authorised representatives. ASIC should also conduct financial advice shadow shopping exercises annually.
Recommendation 3
The committee recommends that the Corporations Act be amended to require advisers to disclose more prominently in marketing material restrictions on the advice they are able to provide consumers and any potential conflicts of interest.
Recommendation 4
The committee recommends that the government consult with and support industry in developing the most appropriate mechanism by which to cease payments from product manufacturers to financial advisers.
Recommendation 5
The committee recommends that the government consider the implications of making the cost of financial advice tax deductible for consumers as part of its response to the Treasury review into the tax system.
Recommendation 6
The committee recommends that section 920A of the Corporations Act be amended to provide extended powers for ASIC to ban individuals from the financial services industry.
Recommendation 7
The committee recommends that, as part of their licence conditions, ASIC require agribusiness MIS licensees to demonstrate they have sufficient working capital to meet current obligations.
Recommendation 8
The committee recommends that sections 913B and 915C of the Corporations Act be amended to allow ASIC to deny an application, or suspend or cancel a licence, where there is a reasonable belief that the licensee ‘may not comply’ with their obligations under the licence.
Recommendation 9
The committee recommends that ASIC immediately begin consultation with the financial services industry on the establishment of an independent, industry-based professional standards board to oversee nomenclature, and
competency and conduct standards for financial advisers.
Recommendation 10
The committee recommends that the government investigate the costs and benefits of different models of a statutory last resort compensation fund for investors.
Recommendation 11
The committee recommends that ASIC develop and deliver more effective education activities targeted to groups in the community who are likely to be seeking financial advice for the first time.
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11 Comments
There is full disclosure of fees, charges and commissions in place already despite how it is collected.
I totally disagree with Rec No 10. The more the Government increases the safety net then the less care potential clients will take in doing their own “due diligence” to ensure that the advice / product is appropriate. Yes advisers have to give advice which is appropriate for the client but the client also has to take some responsibility for the decisions that they make. “Caveat emptor”! Are we to have a state where Nanny will always be bailing witless clients out of the poo?
If you dont already {Legally imposed or} not hold a fiduciary obligation to ensuring your advice is formost to the absolute benefit of your client before yourself you should retire from the industry
It’s rather annoying that the likes of Storm have caused the government to question the whole financial planning industry. ASIC new about Storm, they approved the prospectus when Storm was looking to list in 2007. It seems that ASIC has not raised their hand to admit partial liability, but now the whole industry may pay a price. I do support most of the enquiry, with the exception of commission. I have never had a client complain about it in the past 25 yrs!
Overall, I believe the enquiry has been fair. It makes sense to have deductible fees. How fees will be able to be levied, ie not out of products will be interesting, & how do you create an arms length arrangement between advisers & product providers will be challenging for regulators to achieve their stated aims.
Recomendation 4. there will be an exedous of financial planners who are not tied to the Banks and Insurance companies wil start employing salaried planners which will result in less real competition with a result that the larger companies will squeese out the smaller companies and there will be less competition. Is this the end result the Govt. is seeking?
A luxury motor vehicle is worth more than the average super balance, yet nobody stands in judgement of that person spending more than they ‘need to’ for ‘a vehicle’ to get them from one place to another. It’s called choice. Further, they have no rights to no what profit the dealer makes, how much the salesman made on the deal etc. Why is it just this industry under the spotlight when almost every industry operates on ‘margins’, regardless of what they are called. Most children/young adults spend more on their mobile phones each month than they save or invest, yet are they aware of the ‘commission’ that the phone shops make? No, instead we applaud the owners of these businesses who become multi-millionaires on their recurring income from people making phone calls - and they don’t have to offer ongoing service. I could site another hunderd examples. Double standards all round.
I always make the offer, fee for service or commission. The client always agrees for fee for service but when I produce the invoice the client requests that that figure is deducted from the amount invested. If we are open & honest & provide the correct advice how does it matter how the service is paid for.
As usual, rules are set to be made by people who have no idea that 95% of the public are not net high worth people who often require only portions of the services we supply,so why should they be forced to pay more for fee for service than the cost of the service itself,eg a good risk package might only cost a nominal amount per month.
The mums and the dads are the big loosers of all this fuss, they can’t afford to pay fees and will not be in a position to get proper financial advice. I remember FSR they all said we are doomed, well I have never ever seen better days.
Rules made by people who get a wage and have no idea what it is to prospect, and the cost of running a business, The Government continues to put pressure on small business, compliance etc etc, For me I have costs of near $20,000.00 a month the wages of three people an office and compliance and let me say compliance is the most expensive of all.
Disclosure is fine and I have no issue with it does this mean GERRY HARVEY will be next will he need to sell the product to us plus a fee?
Better still let the fund managers and insurance companies pay a settlement fee or introduction fee and a service fee.
The fees paid to advisers are 1% of that the fund managers collect.
Over 10 years the adviser could be paid 5% upfront and 10% over the time of investment, the fund manager is paid a whopping 20%-40% in fees collected from FUNDS UNDER MANAGEMENT. So why is it always the advisers fees under the microscope?
Recommendation 1 appears fair. However i wonder what specific benefits it would have for the industry. Alternatively, what concerns it may bring?? Any ideas?