The FPA and AFA have called for greater fairness within the financial services sector recommending that product providers be held responsible for product failures and that conflicted remuneration bans be expanded beyond advice to cover all retail clients.
The two adviser associations made the recommendations as part of their submissions to the Senate Standing Committee on Economics Inquiry into consumer protection in the banking, insurance and financial sector which is due to report in mid-2018.
The FPA stated that outside of financial advisers there were a number of market participants who offer products or services, including property schemes, fund managers, accountants and stock brokers that were not appropriately regulated, despite being able to influence a consumer’s decision to invest in a product.
“Each of these participants play some part, either directly or indirectly, in influencing a consumers’ decision to invest in a financial product and the ongoing stability of that product,” the FPA stated.
“However, currently many of these entities or their products or services are not appropriately regulated. Meaning they are not held accountable for their actions and do not have a legal responsibility to the end consumer for their role and influence in getting consumers to buy financial products and services,” the submission stated.
“Product providers should be held accountable for failing to deliver on product benefits…”
“Product providers should be held accountable for failing to deliver on product benefits due to dishonest conduct, fraud or insolvency, or if there are fundamental flaws in products,” the FPA added.
In its submission, the AFA stated also called out market participants such as property spruikers, accountants who ‘act under the client’s instruction’, wholesale client advisers and whole product providers as falling outside the ban on conflicted remuneration.
The AFA said the current laws and the licensing system had enabled loop-holes in which property seminars built around self-managed superannuation funds (SMSF) were able to be promoted and in which real property investments was not considered a financial product.
“Whilst these ambiguities in the financial services laws exist…and the inconsistencies between the licensing regimes of real estate agents, accountants and financial advisers continue, consumers will be at risk of predatory fringe dwellers,” the AFA stated.
It added that a blanket ban on conflicted remuneration would “…shut down the incentives that attract the fringe dwellers to operate such schemes in the first place”.
The AFA submission also called for the licencing of real estate agents who deal in investment properties and the removal of exempted services exclusions for accountants so both group operated under the same rules applied to financial advisers.
