Call for ASIC oversight of Planner Associations
The Australian Securities and Investments Commission (ASIC) should be empowered to license professional associations within the financial advice industry to ensure they are the genuine article and not a destination for miscreant planners.
The Financial Services Council (FSC) Leaders’ Summit in Melbourne was told that just as action had been taken to prevent miscreant planners moving unfettered between dealer groups, similar regulatory oversight of associations was necessary to ensure that planners expelled by one professional body did not simply move to another. Such oversight is necessary in circumstances where not all the organisations seeking to represent the advice industry could legitimately hold themselves out to be professional associations.
What’s to come: FoFA?
ASIC’s ‘shadow shopper’ survey comes ahead of the Future of Financial Advice (FoFA) reforms. From July, there will be a ban on conflicted remuneration structures such as commissions and volume payments for recommending particular investment products. Planners will be legally obliged to place their clients’ interests ahead of their own.
Each year, clients will need to opt-in to continue receiving advice – a reform opposed by the FPA. Percentage-based asset management fees will only be charged if the client agrees to pay them on ungeared investments.
Trail commissions may be banned soon. These are payments made by customers of large super funds to financial planners, although many of these customers don’t receive the financial advice. Trail commissions comprise around 35% of revenue for the financial planning industry.
Whilst the FPA broadly supports the reforms, CEO Mark Rantall highlighted the need for greater study on the reform’s potential costs to the industry.
How can you spot a good financial planner?
If you think you need some professional advice, you should start your search at the FPA.
In terms of qualifications, look for a Certified Financial Planner (CFP) that has a post-graduate degree; this is the highest standard and is a globally-recognised qualification. All financial planners must hold an Australian Financial Services Licence that’s issues by ASIC.
Be sure they are permitted to give advice about a range of financial products, and that they have a good track record in giving advice when the economy has slumped. Some advisors are specialised in certain areas, so that could be a better option for you if you’re concerned about a particular issue, such as self-managed super.
Even though the FoFA reforms are on their way, it’s still important to find out who the planner works for and ask them outright what agreements they have with product providers. This should be detailed in their Financial Services Guide. If you want purely impartial advice, pay on a fee-for-service basis so that you can receive advice from your planner but buy the investment products yourself.
This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs.