Cut bad products or face the regulator’s wrath, panel warns

Kate Cowling


December 7, 2017

The research community needs to be proactive in weeding out products that don’t meet clients’ needs to prevent another crisis, a forum has heard.

Speaking at Professional Planner’s Research Forum in Sydney, a private wealth management firm’s head of research said the industry is “only one crisis away” from being downsized by regulation, which would undermine consumer choice and flexibility of investment.

“If we don’t clean up the industry and take a proactive approach, this industry is going to get smaller and smaller,” he said.

The panel expressed concerns that there were too many investment products that have no place in the ratings universe or in clients’ portfolios. The result could be the regulator stepping in and limiting the choice investors have in where their money is allocated, to reduce the risk of poorly designed or outright unsafe products, one panelist said.

“There are too many products that are not delivering to clients,” a panelist said. “The problem we have in this market is the regulators are so horribly under-resourced that they can’t realistically do their job. We need to stand up as an industry and say that if there are too many products, it needs to be scaled right back.”

There were also concerns that the research community was becoming disconnected from the end client in an age of process, which curbs professionalism.

The private wealth firm head of research stressed that other professional industries, such as law, medicine and architecture, start by asking what the client wants and needs. If research and advice wish to meet the same professional standards, they must become more client-centric and less shackled to process.

When asked whether research is still relevant when end consumers have access to more information than they have in the past, the head of a research house said, “It’s our job to provide, through the adviser, info transparency down to the security level that the end client can’t get themselves.”

Another panelist said, however, that the best client relationships are those that avoid the granular discussion of shares and focus on strategy and goals instead.

The Professional Planner Research Forum is hosted by Conexus Financial and Portfolio Construction Forum.

TOPICS:   investment products

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