FSI interim report canvasses higher planner standards
The Financial Systems Inquiry (FSI) has clearly pitched the imposition of higher education standards for financial advisers, including a national examination regime, a national public register of advisers and greater banning powers for the Australian Securities and Investments Commission (ASIC).
The FSI interim report, published today, appears to have delivered the Financial Planning Association (FPA) a significant win, picking up on many of the key recommendations contained in its submission to the inquiry panel.
In dealing with financial planning, the interim report starts from an "observation" premised as follows "Affordable, quality financial advice can bring significant benefits for consumers. Improving standards of adviser competence and removing the impact of conflicted remuneration can improve the quality of advice. Comprehensive financial advice can be costly, and there is consumer demand for lower-cost scaled advice".
"For consumers to engage effectively with the financial system and meet their financial needs, they need access to advice that helps them make informed financial decisions. Many consumers consider that their advice needs are currently unmet," the interim report said.
It went on to state that studies had suggested there were significant issues with the quality of financial advice, "due in part to varying standards of adviser competence and the impact of conflicted remuneration structures".
"Some submissions suggest aligned or vertically integrated structures may also reduce the quality of advice consumers receive," the report said. "At times, consumers also lack access to affordable advice. In addition, some submissions question whether general advice is properly labelled and whether consumers understand its nature, given general advice often includes sales and advertising information."
It said that on this basis, the inquiry would value views on the costs, benefits and trade-offs of the following policy options or other alternatives.
• No change to current arrangements.
• Raise minimum education and competency standards for personal advice (including particular standards for more complex products or structures such as Self-managed Superannuation Funds), and introduce a national examination for financial advisers providing personal advice.
• Introduce an enhanced public register of financial advisers (including employee advisers) which includes a record of each adviser's credentials and current status in the industry, managed either by Government or industry.
• Enhance the Australian Securities and Investments Commission's power to include banning individuals from managing a financial services business.
• Rename general advice as ‘sales' or ‘product information' and mandate that the term ‘advice' can only be used in relation to personal advice.
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