The Financial Planning Association (FPA) has backed a Labor party bid to step up the pressure on advisers over soft dollar commissions with a strict regulatory crackdown.
The ALP released its election policy on financial services late last week, calling for some soft dollar benefits to be banned altogether and other to be adequately disclosed.
While a complete list of what payments would be banned by a Labor government is yet to be developed, the party’s policy document says soft dollar benefits that are volumes sales related will be high on the hit list.
The moves are similar to the FPA’s own self imposed code of conduct on soft dollar remuneration, which also bans some alternative forms of remuneration that are volumes sales related and requires other to be publicly disclosed.
But the ALP says the FPA’s code, released in July, does not go far enough.
“This self-regulatory approach has been rejected by consumer groups such as the Australian Consumers Association (ACA) who believe that disclosure does not overcome all conflicts of interest and that certain payments should be prohibited by law,” the ALP policy document says.
“In addition, not all financial planners are part of the FPA and therefore they are not covered by the code. In Labor’s view, to protect consumers certain soft dollar benefits should be prohibited by law.”
Responding to the ALP announcement, FPA chief executive Kerrie Kelly says the general thrust of the plans will be supported.
“As the Labor plans point out, the FPA can only act and be responsible for its members,” she says.
“Non-members have not made a commitment to the same levels of professionalism and codes of conduct and ethics.
“We believe that all registered financial planners should be a member of a professional association with the same commitment to the sector as the FPA and its members.”
As part of its bid to win over the financial services sector ahead of next weeks’ election, the ALP has also promised to review the implementation of financial services reform (FSR), arguing the “mountain” of paperwork generated by FSR will prove counterproductive.
“The FSR regime aims to enhance the capacity of consumers to understand and compare different financial products and to evaluate the financial advice that they are given,” the ALP says in its policy document.
“However, some disclosure documents are running to 90 pages.
“In Labor’s view if the paperwork obligations under the [FSR] Act overwhelm the objective of consumer protection, then we need to review the practical application of the Act.”
