You may be surprised to learn that thorough professional standards are not yet in place in the financial advice industry. So what level of care and expertise do you have a right to expect and will the Federal Government’s latest response bring positive change?
This week the Government released its response to the Financial System Inquiry Report – known as the Murray Report – which included recommendations to raise the competency of financial advice providers.
The Government has committed to develop legislation that will ‘raise the professional, ethical and educational standards of financial advisers’. The proposal is that legislation will be passed to ensure that advisers:
- hold a degree;
- pass an exam;
- undertake continuous professional development;
- subscribe to a code of ethics; and
- undertake a professional year.
The Government has also proposed that ASIC’s register of financial advisors be amended to identify whether advisers have met the proposed new standards. This should make it easier for consumers to identify whether a financial adviser is the subject of any bans, disqualifications or code breaches. The Government also proposes to restrict use of the term ‘financial adviser’ and ‘financial planner’ to those listed on the register.
These are all positive steps. However, it will be necessary for the Government to make sure that the proposals are fully implemented in order to provide the maximum benefit to consumers.
Some people may be shocked that these professional standards are not yet in place given other professional advisers in the legal and accountancy professions are subject to strict educational and professional development controls. People who seek advice from a financial planner should have the right to expect that they will receive a certain level of care and expertise. Their affairs should be properly managed. However, while the overwhelming majority of planners provide professional and well considered advice to their clients, we do see clients that fall through the cracks.
The results of poor financial advice can be devastating, especially for people who have sought advice as they are approaching retirement.
While bad advice can obviously lead to significant financial losses; a more insidious result can be that the lifestyle that people envisaged for their retirement can be lost.
The recent impact of poor financial advice and the failure of poorly structured financial products is a well-known issue. There are numerous examples in recent history of planners failing to provide adequate advice to their clients. These problems have affected a broad spectrum of the industry. Slater and Gordon have acted for and assisted a large number of consumers who have been faced with difficulties as a result of the advice they have received.
If the recommendations in the Murray Report are fully implemented, some of the harm that can be caused by poor financial advice may be reduced in the future. This can only be a positive step, which is likely to benefit both the industry and consumers in the long run.