Prescriptive regulation leads to loss of personal responsibility
|
|
Highly prescriptive regulation has led to an environment in which financial planners have abrogated their personal responsibility to the client in favour of a “ticking compliance boxes” approach, according to a submission to the Rippoll Inquiry by industry commentator Paul Resnik.
The regulators in the industry must infuse some level of personal integrity into providing financial advice. There needs to be a higher moral and professional obligation in play besides regulation, Resnik said.
Resnik drew a parallel with the regulation governing financial services firms in the United Kingdom, in which firms are expected to demonstrate that they are treating their customers fairly. The six outcomes dealing with the fair treatment of consumers, including making fair treatment central to the corporate culture, and keeping consumers informed during the advice process, has been a key driver in improving quality of advice, he said.
Resnik also accused the current regulation of asking too much of financial planners by forcing them to assume sole responsibility for advice after taking into account all the relevant circumstances of the client.
Such regulation discouraged the investor from taking meaningful responsibility for the investment decision, and contributed to a loss of confidence in planners and even legal action in some cases, he said.
Recommended for you
In this episode of Relative Return Unplugged, hosts Maja Garaca Djurdjevic and Keith Ford are joined by special guest Shane Oliver, chief economist at AMP, to break down what’s happening with the Trump trade and the broader global economy, and what it means for Australia.
In this episode, hosts Maja Garaca Djurdjevic and Keith Ford take a look at what’s making news in the investment world, from President-elect Donald Trump’s cabinet nominations to Cbus fronting up to a Senate inquiry.
In this new episode of The Manager Mix, host Laura Dew speaks with Claire Smith, head of private assets sales at Schroders, to discuss semi-liquid global private equity.
In this episode of Relative Return, host Laura Dew speaks with Eric Braz, MFS portfolio manager on the global small and mid-cap fund, the MFS Global New Discovery Strategy, to discuss the power of small and mid-cap investing in today’s global markets.
