Planners carry greatest regulatory onus
Inconsistencies exist between the responsibilities of directors and trustees of investment companies and responsible entities and those of financial planners which are serving to undermine consistent regulation of the financial services industry, according to PIS parent company, the Centrepoint Alliance.
Centrepoint has used its submission to the Senate Inquiry into the Scrutiny of Financial Advice to point out that while financial planners must bare a heavy regulatory burden, it is not a burden that is being by others in the financial services industry.
It said while failure by financial planners and their licensees to meet their regulatory obligations would see them being held solely or predominantly responsible for the client's losses, even though the consumer's financial losses may have been ultimately caused by the actions of the Responsible Entity, the directors or trustees of the investment company or trust.
"It is not Centrepoint's submission that advisers should have similar defences to directors and trustees or a loosening of the current financial advice laws," the submission said. "However, it would appear unjustifiably inconsistent when a director of an unlisted property company, such as Westpoint Corporation or Prime Retirement Trust, can have access to a loosely defined defence against claims of inappropriate conduct while the financial advisers who recommended investments in that company (often relying on investment ratings from a rating agency) have the onus to establish that several layers of obligations had been met."
It said that there certainly appeared to be a disproportionately greater risk for financial advisers than for other participants in the industry, "which creates a barrier to entry for financial advisers".
Financial advice laws should not be exempt from review and scrutiny, but they should not be considered in isolation from the conduct of other participants in the financial services industry," the submission said. "A holistic approach to assessments of financial advice and services laws, rather than a compartmentalised or segmented scale of inquiry, should always be the guiding measure."
AUTHOR
Mike Taylor
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
