Speaking to ifa, Simon Longstaff said there are other industries successfully managing conflicts of interest because of “strict ethical boundaries” that are tied to the profession, such as doctors and lawyers.
“At the level of principle, the challenge of vertical integration has been met by other organisations by creating really thick ethical skin around members of the profession,” he said.
“In the world of financial services, particularly as financial advisers start to move toward becoming a fully fledged profession, they are going to have the same challenges as those other professions.
“There is no reason, in principle, why they can’t be just as successful at recognising and respecting the ethical boundaries in which they need to operate, even though they are an employee or a licensee within these vertically integrated structures.”
Last week, ASIC released a report stating that while many vertically integrated businesses are managing conflicts of interest well, there are still players that are not taking their obligations seriously.
Mr Longstaff said some companies do not view ethics and culture as important responsibilities for management. Instead, they will often point to the individual, or ‘bad apple’, in instances of misconduct.
“It’s very easy to dismiss bad behaviour when you say, ‘Oh, it was just a couple of bad apples’. Bad apples need somewhere to grow,” he said.
“Typically, you’ll find that these bad apples have been in the organisation for quite a while. Frequently, they have been successful and well rewarded and there is something about the underlying culture of the organisation that hasn’t had within it the capacity to recognise that they are potential trouble and to deal with them.”
Mr Longstaff is expected to discuss the issue of culture and ethics with ASIC chairman Greg Medcraft on 4 April during the Leading Edge event in Sydney.
Agree compliance joe, I once submitted a report to Asic about ab firm on the central coast who ran the same model as Storm. Tried a few times with actual client complaints, but there was no interest. Probably too busy slamming some other adviser for their “potentially misleading” advertising….
@John Edwards – I agree with you: professionalism has little to do with how you charge fees. However, the regulators clearly don’t agree with us.
But I stand by my initial comment, don’t fall into the mainstream media trap of ‘bank-bashing’ as there have been many disgraceful moments in IFA as well. As to how they keep operating, well, experience in reporting an adviser directly to ASIC has shown me the glacial pace at which they respond. Possibly as a function of funding constraints? But they certainly move quick enough when it suits them. Makes me wonder about the political agenda.
Curious I will give you a few tips to finding them. First do not go to a bank. Second do not ask for a referral from your super fund ( what does that tell you about the adviser ). Do not rely on websites ( are they ever going to tell you they are no good ie are the client testimonials real ? ) Ask around family or friends who have a good relationship with an adviser. Failing that, shop around. We are often told we were the 5th/6th adviser that clients saw before they settled on us. Also don’t expect that the advice practise will necessarily want you as a client. The assumption that advisers need to change to meet the needs of certain clients is ill founded. The best advisers know their value and will only deal with clients that they can add value to and who in return are valued by the client. That limits the market significantly. All the best in your journey.
Curious and Lindsay Binning you won’t find us because we operate on a referrals only basis. This ensures we do not have to deal with the penny pinching tyre kickers that want financial planning advice for nothing.
Garbage!
Compliance Joe my point is that there are many quality financial planners that have been acting professionally for decades who are not heard. It concerns me that professionalism is being defined by how one charges fees rather than by the quality of advice and service offered. Many of the so called professions that we are supposedly trying to compare ourselves to have evolved from hourly rates. Many are involved in business consulting and advice on mergers and acquisitions and class actions that are based on success fees and retainers. This change has corresponded to them moving away from traditional tax or audit work to a more holistic approach. This is what good financial planners have been doing for decades. The banks should simply be categorised for who they are and what they stand for rather than using their behaviour to define all financial planners. I have no doubt you have audited poor advice. The question is how are they still operating. If you want to solve the problem we need to stop them but the regulators keep making excuses and exemptions to allow them to continue.
@Compliance Joe who are those few you would go and see?
@John Edwards – professionalism has always been there? Well, possibly in small pockets and you may very well be one of them, but the early days of this industry were dominated by risk insurance salesmen, none of whom were considered ‘professionals’. There are many of these advisers still out there and they don’t all work in the banks. Having worked in compliance across the ‘independent’ sector for some time, I can assure you that the only reason banks can be held up as the source of tarnishing is that it gives the media something ‘news-worthy’ to sell to the public. In fact, a complete lack of professionalism is rife across the industry. No doubt this comment will invite the usual detractors to lambast me, but consider this: although I’ve been around this industry for a long time, there are very few that I would go and seek out advice from.
So we are moving towards a fully fledged profession are we ? What then Have I been doing for the last 20 Years ? Why is it that the whole financial planning industry is tarred by the behaviour of the banks ? Why don’t the regulators look at the longer term history and that the banks have lowered the standards. Professionalism has always been there. The regulators have not known where to find it let alone how to regulate it.
Wow, what planet are you on or better still what are you on?
if you believe ethics will overcome entrenched culture in the short term you are mistaken. large enterprises always allow this problem to exist. The issue starts at the top and once the top enforces ethical and best interest procedures, some change will slowly occur. When you talk to ASIC, forget the theory, talk what needs to occur initially. Clean out the “”hidden culture and the closet””.
How can it be a profession when the doctor is employed or licensed by the drug company itself? Even the doctors that put their hands together to form an inclusive ring are only pushing their own product/s. That is the model of 80% of the advice world.