FPA conflict principles fall short: ASIC

The Financial Planning Association’s (FPA) new conflicts of interest principles do not go far enough to ensure compliant advice, according to Australian Securities and Investments Commission (ASIC) executive director of consumer protection Greg Tanzer

Speaking during a lunchtime meeting of the FPA’s Sydney chapter on Friday, Tanzer said ASIC sees the solution to conflicts of interest as “going beyond pure disclosure”.

“The FPA has put out a very helpful set of guidelines for managing conflicts, and I applaud that initiative, but there is still more work to be done in this area.

“The requirement of the law is really about whether the advice given has a reasonable basis, so it’s not a question of higher industry standards but, rather, whether the client is not worse off as a result of taking the advice.”

Tanzer said ASIC would be working with a number of licensees with a particular focus on conflicts of interest, following the release of its 2006 shadow shopper survey on Thursday last week, which found planners with a conflict of interest were three to six times more likely to give unlawful advice.

“That doesn’t mean we’ve got to ban all conflicts of interest or all commissions or anything of that nature, although there are people moving to ban some types of conflicts and those wanting to move to a fee-for-service model.”

FPA board member and MLC head of planning Matt Lawler responded to Tanzer’s presentation by calling on industry to embrace the findings of the survey “without the emotion” that accompanied the initial ASIC shadow shopper survey in 2003.

He said the industry had reacted to the initial ASIC survey in “three different phases — the storm, the norm and the perform phases”.

“Why don’t we just skip the storm phase this time around,” he exclaimed

He said that “over the next little while” the FPA will work with ASIC to identify the core compliance issues revealed in the survey and to work through these.

“If that means banning some things and if it means altering some things, then I think this industry has proved that were up for it.”

Lawler said the survey had revealed the need for a clear practical distinction between personal advice versus general or product advice — a topic broached recently by the Government, which on Friday called for industry feedback on its second tranche of refinements to Financial Services Reform.