Key industry players react to the recommendations of the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into financial products and services in Australia.
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Jo-Anne Bloch, chief executive, Financial Planning Association of Australia: “We think that the recommendations are sensible, and will deliver a balance between improving consumer protection and improving financial advice.
“In particular, we support the fiduciary responsibility, and definition of ‘put your clients first’ – you would be aware that the FPA’s fiduciary responsibility is called ‘client first’.
“I think tax deductibility of financial planning fees is very welcome, because we’ve been talking about this for a long time and it will level an unlevel playing field, as well as enabling more Australians to afford advice.
“We support and are leading the way on improving professional standards and educational standards, and we will be a leading contributor to the discussions around a professional standards body. We welcome the fact that the PJC has understood the role of a professional body, and the need to cover all financial planners -not just those that have chosen to join the FPA.
“There are a number of different [ways] a professional body can work, and we have some ideas as to what will work and what will not work, and we’d like to work with the PJC on an appropriate model for Australia. This is something that we’ve been studying for some time.
“From the ASIC point of view, the PJC has supported a number of their requests, including licensing standards and being able to ban individuals. We also support ASIC adopting a risk-based surveillance system.
“The rest of it, we are working our way through. We think all of the recommendations are sensible, and can be worked with going forward.”
(Source: Interview with Professional Planner)
John Brogden, chief executive, Investment and Financial Services Association: “The Committee’s recommendation seeking a fiduciary duty for financial advisers is a win for consumers and a win for the professional standing of the advice industry. The debate over conflicts of interest should now be put aside, enabling the industry to move forward on a solid professional foundation.
“If a fiduciary duty for financial advisers is adopted, we do not believe that ceasing remuneration paid to financial advisers from product manufacturers is required. However, if the Government adopts this recommendation, we will work with them to ensure that the outcome is in the best interests of consumers.
“We are pleased that the Committee recognises the need for Australians to be able to claim for payments for financial advice as a tax deduction, irrespective of the method of payment. This will, if adopted, put financial advice within the reach of many more Australians.
“We also welcome the Committee’s adoption of IFSA’s recommendation for a risk-weighted approach to the supervision of licensees. This will enable ASIC to more effectively monitor and assess licensees and the quality of advice.
“Further, we support the establishment of an independent, industry-based Professional Standards Board for financial advisers.”
(Source: IFSA statement)
Jim Taggart, national president, Association of Financial Advisers (AFA): "The recommendations represent an important step forward in the journey towards making the financial advice industry one of Australia’s most trusted professions.
“The Committee has recognised the complexities of our industry and addressed all the major issues. The Rubicon has been crossed.”
Richard Klipin, chief executive officer, AFA: "The recommendation to impose a fiduciary duty on financial advisers to place their clients’ interests ahead of their own is formal recognition of a responsibility we at the AFA have already enshrined in our Code of Ethics. We are pleased the Committee has endorsed the action we have already taken with our members.
“Remuneration is a complex issue and the AFA is pleased the Committee chose to recommend the Government take a consultative approach to the issue. We believe consumers should always have a choice in the way they remunerate their advisers.
“If adopted, tax deductibility will make advice more accessible and affordable to everyday consumers, which is a win for middle Australia.
“If done well, shadow shopping is a litmus test on the health of a financial advice business and therefore the financial advice profession as a whole. However the AFA has some concerns that, if done poorly, it has the potential to become a witch hunt of financial advisers.”
“A professional standards board is a great opportunity for the industry to unite and collaborate on the key issues of professional standards and education. We look forward to working with ASIC and the industry on this important, ground-breaking initiative.
“If all industry players can work together in the best interests of the consumer, we believe the future is bright. The AFA looks forward to taking a consultative approach in working with ASIC, the government and the industry to improve the financial services landscape.
“The Committee has put in many months of tireless effort. We believe that their hard work will be rewarded and expect that, like the Wallis Report, the Ripoll Report will have an important place in the history of financial services.”
(Source: AFA statement)
Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law: “This report is a welcome contribution on the discussion over the future direction of the financial advice industry and investor protection in Australia.
“Recent controversies, such as the Storm Financial collapse, have dented confidence in the financial advice industry.
“The Government will respond to the committee’s report in conjunction with the Cooper Review, which will also be looking at commissions and fee structures in superannuation.
“Importantly, the Government has already moved to put in place a national regulatory and consumer protections surrounding margin lending."
“Any regulatory changes by the Government will be guided by the following two key principles:
Ã¢â‚¬Â¢ The financial advice that people get must be in their best interests – distortions to remuneration, which misalign the best interests of the client and the adviser, should be minimised; and
Ã¢â‚¬Â¢ In minimising these distortions, we need to ensure that we don’t put financial advice out of reach of those who would benefit from it.
“We’ll be working through the recommendations of the Ripoll report and will judge its recommendations against those two policy principles, to help ensure that financial advice is in the best interests of the client, while keeping this advice within the reach of those who may need it most," Mr Bowen said.
“The move away from commissions will improve transparency for consumers and will help to ensure that your clients receive advice which is free from any conflict of interest, whether real or perceived.
“It is worthwhile noting that this is a report with the support of both sides of politics.
“The Shadow Treasurer’s announcement last week that the Coalition will oppose the removal of commissions sought to pre-empt this unanimous report.”
(Source: Minister’s statement)
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