Better competition criteria needed: FPA

Competition within the financial advice industry leads to improved client outcomes and affordability, the FPA has said in a submission to the Productivity Commission’s inquiry into competition in the Australian financial services industry.

The submission noted that traditionally, customer outcomes were assessed based on their improved understanding of financial matters and their confidence in making decisions, but the FPA warned that this can overlook advice clients’ quality of life and individual satisfaction.

“Criteria to assess consumer outcomes should also encompass consumer values, consumer satisfaction and, importantly, consumer well-being,” the submission said.

“The vast majority of those consumers (79.1 per cent) currently advised have indicated an improvement in financial wellbeing since engaging a financial planner.”

Measures of well-being have been used to inform Australian policy for over a decade, the submission said, and according to the Australian Bureau of Statistics can be assessed through individuals’ self-evaluations, and this approach is needed to inform future industry regulation.

“Competition is essential to drive improvements in the quality of advice and positive consumer outcomes in this unique market,” the submission said.

The submission said issues that affect the cost of advice for consumers will “directly influence consumer value” and well-being, and subsequently affect competition within the advice market.