Greater onus on product manufacturers
Product manufacturers would be made more accountable for the design and distribution of their products under a new regime recommended by the Financial System Inquiry (FSI).
The FSI has substantially backed the calls of the financial planning industry for higher competency and education standards and the relabelling of general advice.
In a recommendation likely to resonate with financial planners who have argued they should not be blamed for product failures, the FSI final recommendations state that the issuers and distributors of products should be made more accountable for the design and targeted distribution of their products.
As well, the report recommends that the Australian Securities and Investments Commission (ASIC) should be “enabled to take a more proactive approach to reduce the risk of significant detriment to consumers”.
However, while pointing squarely at the product manufacturers, the FSI recommendations also provide substantial backing for a client best interests approach, stating that “firms need to take steps to create a culture that focuses on consumer interests”.
“This should include addressing conflicted remuneration in life insurance advice and stockbroking,” it said.
“Underscoring the importance of improved standards and accountability, the Inquiry recommends giving ASIC enhanced powers to ban individuals from financial firm management. The Inquiry recommends lifting the minimum competency standards for financial advisers, improving transparency of adviser firm ownership and relabelling general advice,” the recommendations said.
“In addition, the Inquiry recommends enabling better access to quality guidance for home building and contents insurance to reduce the risk of underinsurance,” it said.
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