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What You Need To Know - Royal Commission and Financial Advice

Editorial General 29 Mar 2018

After a couple of weeks of revelations about abhorrent practices at the big banks including dodgy “introducer” schemes to sell more mortgages, car loan scams and credit cards being pushed on problem gamblers, it’s the financial advice community that is about to be put on the blocks.

As a consumer who is receiving – or thinking about getting some professional financial advice, you could be forgiven for feeling a little anxious about what the hearings might expose.

It is not our job to defend dodgy institutional practices or shield individuals who have behaved poorly. In fact, we want these practices and individuals penalised, exposed and put on display for all the world to see. It’s not the only way to change things but shining light where there was previously deep shade gives you, the people, the opportunity to vote with your feet and signal to the industry that you will not stand for mendacious, deceitful and dishonest behaviour in the future.

We don’t know exactly what new information will come to light at the royal commission, but it’s not as if many of the off-putting issues with financial advice are unknown and haven’t been tabled before.

There have been dozens of enquiries into the banking and finance sectors in recent years that have shed light and forced change in the industry. Despite what many may think, steps have been made, particularly in the financial advice space via the Future of Financial Advice (FOFA) reforms to modify and correct the way the sector operates. Explicitly, these reforms were “to improve the trust and confidence of Australian retail investors in the financial services sector and ensure the availability, accessibility and affordability of high quality financial advice”.

Along with the potential for new issues to be raised, the royal commission will undoubtedly rehash some old ground, but rather than being reactive and waiting to see what comes from the commission, we’d like to offer some pro-active steps you can take right now that may help ease any anxiety you may have about receiving financial advice.

What You Can Do Right Now

All advisers who are licensed to provide financial advice are listed on this registry. If they’re not on the registry, they shouldn’t be getting paid for advice.

Ask your adviser if it’s up to date with all their latest qualifications, training and what financial products they are allowed to give advice on.

Enforceable Undertakings (EU’s) are undertakings given to ASIC (and accepted by ASIC) which are enforceable in a court. They are generally accepted by ASIC as an alternative to civil or administrative action where there has been a contravention of the legislation they administer.

EU’s are made public through the enforceable undertakings register and are free of charge. Has your adviser, (or their practice or licensee) been subject to undertakings in the past?

  • Has your adviser been disciplined by their membership organisation?

The largest adviser membership organisation, the Financial Planning Association of Australia (FPA) has a register of actions and outcomes regarding “Breaches of FPA Professional Standards” the latest being published here.

Being able to see what an advisers own clients say about them, can be a very insightful process. The more client comments you can look at, the better the qualitative evaluation you are able to make.

  • If you’re already receiving advice – check your Statements of Advice (SoA’s) to see whether your funds are currently allocated as they should be.
  • Is your adviser in regular contact with you?

A simple google search on the adviser will also often help you discover more things about your adviser - are they a thought leader? Do they engage in any philanthropic activity that may denote their ethical approach?

The industry has many legitimate problems including structural ones that are beyond many advisers control, but the vast majority of advisers are generally good, honest, capable and act with the professional integrity that you would expect.

When there is an example made of a particular individual who has done the wrong thing – which will no doubt surface during the course of the commissions hearings, the entire industry can be smeared. It may help you to contextualise any anxiety you may feel if you have already undertaken some of the appropriate due diligence mentioned here.

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1 comments

"Unless the big banks get out of the wealth game the problems with vertical integration will persist. Structure is the biggwst issue and what should be addressed. You can't legislate for dishonesty. Theres no way joe public is getting their best interest duty served when advisers so obviously (latest ASIC report) funnel their clients money into their owners product. Don't quibble with rubbish arguments. The facts speak for themselves. Anything to say from aligned advisers? No, i thought not...!"

Craig G 17:34 on 29 Mar 18

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