Industry upbeat in wake of findings

Despite one in five financial planners falling foul of the corporate regulator in its latest shadow shopping exercise, and the resulting negative coverage in the mainstream press last night, the financial services industry’s response has been markedly upbeat.

The Financial Planning Association (FPA), which faced the press yesterday, concentrated on the positive findings in the survey, which found advisers were far more likely to give unlawful advice if they had a conflict of interest, while the Investment and Financial Services Association (IFSA) hailed the results as a sign of progress.

“The finding that 5 per cent of consumers were dissatisfied with the advice that they received is a dramatic improvement on the 2003 survey,” said IFSA chief executive Richard Gilbert.

He said the results showed the toughening of regulations applying to planners had generated a good outcome for consumers. Gilbert went on to compare the findings to a similar shadow shopping study of financial planners conducted in the United Kingdom in 2005.

“In short, 30 per cent of advisers did their job well in the UK, compared to almost 81 per cent of advisers in Australia.”

The man in charge of Australia’s biggest bank, National Australia Bank (NAB) chief executive Ahmed Fahour, said the results “reflect the improvement in the overall quality of advice being experienced by customers”.

NAB head of financial planning Matt Lawler said: “There was a good majority of planners found to be giving good advice, so let’s acknowledge that the bulk of the industry and the majority of advisers surveyed are doing the right thing and are doing a good job.

“What the report allows us to do now is to hone in on issues which are now affecting that small minority. That’s an important step because prior to FSR [Financial Services Reform] it was considered there was a problem with 100 per cent of the industry, but now we’re honing in on a very small portion of the industry, and that’s the pursuit of continuous improvement.”

A spokesperson for AMP said it was encouraged by the results, but acknowledged that the industry still had a long way to go to improve itself.

“That’s why we’re in the midst of a program to reform and restructure our financial planning business,” the spokesperson said, referring to the conflicts audit AMP will conduct on all of its financial planners.

The head of Australia’s biggest independent dealer group, Count Financial chief operating officer Marriane Perkovic, said it was a “real positive” that most clients were satisfied with their advice.

“And that certainly didn’t come across in the first survey,” she said.

“For a long time we’ve had a bit of a vacuum regarding what ASIC expected of the industry, but the super switching campaign and also the previous shadow shopper survey have helped clarify what ASIC wants and will help improve the industry going forward.”

But not all were as positive about the findings. In its official comment, the Association of Superannuation Funds of Australia (ASFA) weighed into the fees versus commissions debate.

“The super and financial advice industries must accept the ASIC results as a challenge to find an appropriate structure of payment for financial advice that does not influence the advice provided,” said ASFA chief executive Philippa Smith.

“Either the potential conflicts of interest in commission-based advice must be better managed, or we must find alternative options for payment.”

The Institute of Chartered Accountants also called for a move toward fee-based adviser remuneration, despite chief executive Hugh Elvy acknowledging “there had been an overall improvement” in planner competency.

The Australian Consumers’ Association (ACA), which helped ASIC prepare the last, far more damning, shadow shopping report, this time called for more regulatory reform.

“If the Government wants to properly protect the retirement incomes of Australian consumers it urgently needs to give ASIC wider powers to control or prohibit conflicts of interest,” said ACA chief executive Peter Kell.

The Shadow Federal Minister for Financial Services, Nick Sherry, went as far as to say the survey had “slammed” the advice provided on superannuation.

“This means tens of thousands of Australians are getting a bad deal under the Howard Government’s so called Super Choice regime.

“Labor is gravely concerned at the impact of fees, particularly commissions, on worker’s superannuation savings.”

The office of the Parliamentary Secretary to the Treasurer, Chris Pearce, said the Government had no comment.

Financial planner Wayne Lear of Guardian Financial Planning said: “Where the law is lacking is in getting the financial planning industry to become more human about their relationship with the client.

“We should treat the client as the client, not the money as the client.

“How are you measuring peace of mind? That is exactly what is lacking in shadow shopper.

“Shadow shopper bypasses the human element in this.”