Audit appropriateness of advice before its delivered

Financial planning firms should audit the appropriateness of the advice and strategies being delivered by their financial planners before they are implemented rather than after the event, according to a submission to the Parliamentary Joint Committee on Corporations and Financial Services by Sydney-based planner Paul Levy.

Levy has argued that while many planning firms audit the advice and strategies being delivered by their planners, it invariably occurs after the event.

He has suggested that the audit be undertaken by a panel of CFP qualified advisers.

“I submit that if the auditing process included an assessment of recommendations prior to implementation, where the actual advice, strategies and recommended products were assessed for appropriateness to a particular client, irregularities may be detected early and there could be far fewer investors putting their hard earned life savings into unrealistic strategies and/or products fraught with danger and unrealistic expectations,” Levy said.

He argued that this would result in less financial stress and devastation when products and/or companies ultimately collapsed.

“By having the benefit of recommendations and strategies assessed by a highly experienced team of CFP advisers before investing, investors would have one more layer of protection by knowing that, whilst products and performance cannot be guaranteed, the quality and appropriateness of the advice they have been given is sound and appropriate to their needs at that stage of their life cycle,” Levy said.

Like a number of other planners making submissions to the Parliamentary committee, Levy suggested that banning commissions did not represent an answer to overcoming bad advice and carried with it the risk of investors paying more in fees than they currently do in commissions.