Lukewarm response to two-tier system proposal

The Parliamentary Joint Committee (PJC) on Corporations and Financial Services is gauging the industry’s reaction to the possible implementation of a two-tier advice system of independent and affiliated financial planners.

At the public hearings of the PJC inquiry, the committee quizzed industry representatives on their opinions on establishing a two-tier advice system of independent and affiliated financial planners, using the model advocated in MLC’s submission to the PJC inquiry as an example.

The MLC submission to the inquiry advocated financial planners being licensed as either an affiliated or independent financial planner. Both terms would be designated definitions under the Corporations Act and be fully regulated by the Australian Securities and Investments Commission, with the same qualifications.

This would better inform consumers of the nature of the service each would provide, the submission stated.

The committee suggested independent financial planners have extra fiduciary obligations to the client, compared to “financial product salesmen”.

However, several representatives to the public hearings and industry associations have expressed concern with the suggestion.

“We see that as another layer of complexity [and] I think some of the objectives of the inquiry should be about making things more simple and transparent in the eyes of the consumers,” said Guardian Financial Planning executive manager Steve Browning.

“Our view is really about raising the bar generally for advisers in their advice-giving capacity, rather than creating multiple tiers of advice, which I sense might serve to further confuse consumers about what sort of advice it is that they’re getting.”

ANZ managing director, investment and insurance, Geoff Cohen said the provision of good advice was more than offering product A over product B.

“The reality is that 80 per cent of financial planners work with an affiliated dealer group, so they shouldn’t shirk away from that responsibility and cloud it,” he said.

Argyle Lawyers principal June Smith said there was already significant confusion about who could give financial advice, and creating a two-tier system of financial planners could create more confusion with additional terms.