ISN calls for stronger consumer protection
The Industry Super Network (ISN) has called for "watertight" consumer protection requirements to guard against future financial planning "scandals".
In its official Future of Financial Advice submission, the ISN said a robust and watertight set of legal requirements on financial planners is the most effective way to insure against future financial scandals eroding individual and aggregate national retirement savings.
This will achieve the policy objective of increasing the professionalism of financial advice in Australia, increasing consumer confidence in advice and facilitating better access to advice, the ISN stated.
The ISN also called for the full annual disclosure of all fees and payments.
"It is inconceivable that the current regulatory gap, which means clients receive no ongoing disclosure of fees from financial planners, would not be rectified," ISN Manager of Strategy Robbie Campo said.
The best interests obligation must "create a clear and watertight obligation that protects Australian consumers from the self-serving and structurally corrupt business model, which currently dominates the financial planning industry," she said.
The legislation should be formulated as a principles-based obligation that ensures all personal financial advice prioritises the client's interests over the interests of the adviser, licensee or other related party, she said.
"A highly prescriptive or process-driven best interests obligation will be used by the financial planning industry to create loopholes and will impede the provision of affordable advice," she said.
The reforms need to make clear that the best interests obligations apply to existing "passive" clients who are paying ongoing commissions and fees, she said.
The ISN continued to oppose ongoing and asset-based fees, and supported an increase in Australian Securities and Investments Commission powers "to ensure the regulator is better equipped to tackle bad apples and to initiate more proactive surveillance of the financial planning industry".
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