The move towards a commission-free financial planning industry is inevitable, writes Mike Taylor.
It says much about the reputational damage inflicted on the Australian financial planning industry over the past five years that virtually no one, apart from planners themselves, found cause to question the legislative changes to planning outlined last week by the Minister for Financial Services, Chris Bowen.
Ordinary consumers reading newspapers or watching television could have been forgiven for believing the Government had acted to end an outrageous rort perpetrated by a group of unscrupulous rogues.
There were plenty of mentions of Storm Financial and Westpoint, but few references to the manner in which the industry had already addressed its own shortcomings.
But the bottom line is this: the sheer weight of public opinion makes change inevitable and retaining commission-based remuneration untenable.
Once that reality is broadly accepted the financial planning industry can unify to ensure the other elements of the Government’s proposed legislation do not result in serious unintended consequences, such as unduly empowering the big banks and creating a risky two-tier advice environment.
Commissions only ever represented one element of conflict in the planner/client relationship and always needed to be measured against the commercial imperatives that drive planners who work within financial institutions, including banks and super funds.
And the Government is wrong if it believes it can legislate significant changes to the delivery of financial planning while simply expanding the provision of intra-fund advice under the existing relief offered by the regulator.
The perpetuation of a two-tiered legislative environment is unwise, highly dangerous and points to a Government willing to favour sectional interests.
Super funds providing financial advice must be made to adhere to the same standards as financial planners.
If the Government was made uncomfortable by the fallout from the home insulation debacle, it should contemplate the damage likely to result from bad advice given within super.
When the Howard Government introduced Financial Services Reform many loose ends needed to be tidied up. Bowen must ensure that his proposed changes do not create more problems than they solve.
