In a submission to the government’s consultation around the proposed scheme, the AIOFP suggested funding for the scheme should be split between product providers and advisers, with advice firms to be levied only for failures of strategic advice such as incorrect risk profiling or estate planning recommendations.
“It would be totally disingenuous to levy a fee upon the advice community for losses that they essentially have nothing to do with – surely the product manufacturers must now finally stand by what they build, manage and reap profits on,” the association said.
“Over the past 40 years they have successfully ‘spun’ the blame for their sector’s woes onto the advice community, so much so that the PI underwriters are seriously considering leaving the current Australian market.”
While the association agreed that both advisers and product providers should be liable for annual contributions as well as other one-off payments for “specific unforeseen circumstances”, there needed to be a fairer split between the two parties when it came to systemic product failures.
“For any hybrid failure that involves both product and advice intertwined, a separate committee with members from [both parties] should decide the split of responsibility. An independent chair [should be] sought to oversee the process,” the AIOFP recommended.
“If this is done the losses associated with actual poor financial advice will pale into insignificance against the $40 billion of failed managed funds since 1980.”
The association pointed out that a number of the major product failures in the financial services industry had occurred with products that had been given full approval from research houses and regulators, meaning it was unreasonable to blame advisers for not knowing the products would fail.
“The failed Astarra Absolute Return Fund has three positive research ratings, a major bank as its custodian, an impressive return track record over many years and the fund’s PDS was registered by ASIC and allowed onto the market – it looked great on paper but failed dismally due to alleged offshore fraudulent behaviour,” the submission said.
“If ASIC, a bank custodian, trustees and three research houses cannot detect fraud, how are advisers sitting in their offices meant to?”
you watch when the market tips and the fund managers get away with murder not doing their jobs and watch the financial planners get the blame yet again.
“The failed Astarra Absolute Return Fund has three positive research ratings, a major bank as its custodian, an impressive return track record over many years and the fund’s PDS was registered by ASIC and allowed onto the market – it looked great on paper but failed dismally due to alleged offshore fraudulent behaviour,” the submission said.
“If ASIC, a bank custodian, trustees and three research houses cannot detect fraud, how are advisers sitting in their offices meant to?”
This.
and so they should share responsibility. All that has been with all reforms is to shift 100% of the blame to advisers. These grubby execs should be held to account – I’m still waiting for the RC charges to the banking execs!
The problem with the compensation scheme is that its not just advisers and manufacturers selling these products. The majority of the problems are caused by sales sharks who hold no qualifications but are able to sell junk products without any compliance or need to adhere to the Best Interests Duty. How is it fair that a sales rep from I-Select can sell the same insurances as a fully qualified adviser, however the adviser needs to complete a fact find, prepare a Statamemt nof Advice and Act in the Client’s Best interests when the sales rep with 2 hours training can sell the exact same product however without any upfront or ongoing training, no compliance, no BID no SOA, no $20k pa professional indemnity insurance, no ASIC levy, no annual review and worst of all, nowhere for the client to turn when things go pear chaped because they operate outside the law.
Being an financial adviser is a joke. The only reason anyone would bother with it is because they can charge people’s super funds for the advice they give. Hint – just charge people from their bank accounts, drop the financial adviser qualification and do everything you currently do under No Advice or General Advice. If everyone else gets away with this method then why shouldnt the self employed advisers. WHO WERE THE ONLY PARTY WHO EVER WORKED IN THEIR CLIENTS’ BEST INTERESTS IN THE FIRST PLACE.
But wait Peter, just ask Sally from the FSC – its always Advisers fault – regardless of anything else.
Get it – the Pollies, ASIC, Industry Funds, Media, Everyone loves to blame the Financial Advisers – no one else.
Shows you exactly where the power is in the chain of Financial Services and the litte guys always getting blamed for the big guys stuff ups as they walk off into the sunset with Golden Parachutes.
Time to change.