The Australian Securities and Investments Commission (ASIC) has issued a warning to the advice industry, saying there are several areas where advisers need to ‘lift their game.’
The warning comes as a result of ASIC’s latest Shadow Shopping study, which found just 3% of advice provided was deemed to be of ‘good quality’, while 39% of the advice examples were poor and 58% were considered adequate.
The Shadow Shop reviewed 64 examples of personal financial advice given to real consumers. The advice was then graded as good, adequate or poor, based on a series of benchmarks determined by an expert panel. The review found just two examples of good advice, compared with 37 adequate advice examples and 25 poor examples.
ASIC Commissioner, Peter Kell, said the research demonstrated there was scope for significant improvement in the provision of good quality advice.
“Too much poor advice provided to our shadow shoppers was overly product focused and not strategic enough to help clients develop a realistic and achievable plan for their retirement and make the most of their financial resources taking into account their circumstances and attitudes to risk,” he said.
While the Shadow Shop focused on retirement advice, it identified a number of common problem areas that ASIC is likely to continue to investigate. They include:
- Inaccurate or incomplete investigations of a client’s personal circumstances
- Strategies that do not address the client’s needs or objectives
- Poor scoping of advice, where advisers exclude crucial topics, such as clients’ debts, from the scope of the advice, or fail to clearly explain the limitations of the advice
- Failure to provide appropriate justification for switching recommendations
- Poor communication in a Statement of Advice
The study also found that advice customers had difficulty assessing the quality of the advice they received, with 86% of participants saying they felt they had received good advice, and 81% saying they trusted the advice they received from their adviser ‘a lot’.
This underlines the importance for the industry to… improve overall professional standards to ensure that their client’s trust is not misplaced
“Advisers are important gatekeepers who have a key role to play in helping consumers plan and manage their finances,” Mr Kell said. “This underlines the importance for the industry to remove conflicts of interest and improve overall professional standards to ensure that their client’s trust is not misplaced.”
As a result of the study, ASIC said there were a number of areas where the advice industry, consumer groups and the Commission could work together to improve the quality of financial advice. This may include further shadow shopping as recommended by the Parliamentary Joint Committee on Corporations and Financial Services report into the Future of Financial Advice reforms.
So here we have it after 3 years of debate the real issue not opt in ,not commission,the big 5 own distribution ,own advice and asic is surprised and dissapointed,this will all go in a circle and get thrown into a corner before the next election what a waste of time and money ,isint there an accronam for that?
I want to know who the so called experts are on the panel. I also question the subjectivity of the benchmarks and a recollection of the events that took place in face to face interviews. The notion that advice or discussions included in the advice documents produced by the adviser may not exactly match the information in the fact find document may or may not be sufficient to justify judgement.
I am totally suspicious of the ability or knowhow of ASIC or its appointees to objectively measure or assess this industry as previous history attests to their previous work.
The whole concept of shadow shopping leaves me feeling a little uneasy.Someone gathering information undercover seems a bit sleezy to start with and then ASIC are unhappy with the outcome.Surely there is a better way for everyone involved.
ASIC has no clue regarding this. As the ‘regulator’ if there is a deficit in advice quality it is there fault due to poor direction and guidance over the years leading to this outcome. It is hard to apply new rules & filter to a workforce whose training spans substantial years and expect instantaneous outcomes. ASIC clean up your own act first, get yourselves in order & look in your own back yard & stop passing the buck by splurging bad media on a profession who is at the forefront globally in regards to standards & sophistication. We are as professional as any other occupation, be it Doctors, Legal or Accounting and in all the above cases, generally have a much better understanding of our clients overall situation than any of them. It would one amazing execise to ‘shadow shop’ those individuals within ASIC in their daily worklife and score them on how they live up to expectations and professionalism – especially being public servants I expect the outcome would be far from pretty and fall well under the 61% being ‘adequate’ & ‘good’ combined.
MAY BE IF THEY HAD SURVEYED A WIDER NUMBER OF AVALABLE PLANNERS THEY MAY HAVE HAD A NMORE REPRESENTITIVE RESULT. oNLY 64 OF ABOUT 2700 SEEMS TO ME TO BE JUST A LITTLE LITE ON. JG
If you ever had any doubts on media spin and the agenda of ASIC and the self appointed 50,000 Tweed suited Subaru driving teachers who pay to actually belong to CHOICE “Consumers association” here it is – the media report the bad news when the report actually states
” REP279 – ASIC Key findings ( on asic site.)
18. We found that, while the majority of advice examples we reviewed (58%) were adequate, 39% of the advice examples were poor, and two examples were good quality advice (3%).”
So media the media focus on the 39% – yet the factual news is 58% are adequate (ie.good ) and 3% exceptional. So, 61% of the shadow shopper had appropriate advice!
61%, So assuming you act on the advice from ” Choice” and get more than one quote/plan odds are that two of your three choices will be ” adequate” ( good in other words that don’t suit their anti planner agenda) or excellent. Spin that.
From the CHOICE WEBSITE
How many voting members are there?
About 2,000.
So i was wrong only 2000 Tweed suited Subaru teachers drive the ” consumers champion ” might be time for a new voice ? 20,000 planners in oz ? lets change the tune.
Would be very interesting to see a break down of the 39%..independents, life or bank advisers?
Probably never know, because ASIC loves to keep us all jumping.
i have noted all the comments ,have you all overlooked the obvious ,85%were promoting the in house brand because they were restricted by a limited apl ,because the distribution is owned
by the manufacture, doesnt this seem bizare?
ProdPusher – not bizarre, this is the system that planners have been forced into by the past 20 years of regulations that the regulators are now saying aren’t adequate. Kind o flike asking A ford dealership to tell potential customers to go to Holden instead… where is the regulation & criticisms on that industry? Why do some Doctors prescribe actual brand names prescriptions rather than generic pharmacy brand? Why do Accountants all use different trust services for setting up SMSF’s, trusts, companies etc? It’s called ‘market forces’ & democracy, not socialism…. which makes me wonder what the current hea dof ASIC’s motivations are by releasing clearly negative media releases. Self promotion? Distancing itself from their disasterous inaction & ‘clean bill of health’ that they gave Storm? My opinion of ASIC is that they are useful only in the respect that they help assist the official unemployment rate as I have seen nothing useful come from their organisation and wonder how emploable they would be in a commercial world.
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