Just days out from the final report of the Royal Commission, Industry Super Australia (ISA) has told a key parliamentary committee that it should not be assumed that financial advisers can be trusted to give superannuation fund members advice on selecting post retirement products.
In a submission to the Senate Economics Legislation Committee, ISA pointed to both the Royal Commission interim report and the recent findings of the Productivity Commission to argue that it should not be assumed that retirees will be able to rely on financial advice in making their post-retirement product selections.
It stated: “In short, the current financial advice regime cannot be relied upon to protect consumers”.
“It might be argued that retirees will be able to make effective choices between different pooled products after 1 July 2019 by utilising financial advice,” the ISA submission said but then pointed to the Productivity Commission’s recent final inquiry report which it said “provides support for the view that the current regulatory framework for financial advice cannot be relied upon to connect retirees to the best income products”.
“It observes that: ‘Despite the Future of Financial Advice reforms, conflicted financial advice remains an egregious problem (especially within vertically integrated organisations)’,” the submission said.
The ISA submission said the interim findings of the Royal Commission had also “highlighted a number of recurring problems with advice provided by advisors employed or franchised by for-profit product providers”.
“In particular the Royal Commission found that the routine provision of advice that was in the best interests of the advisor and product provider – rather than the client,” it said. “FOFA has proven ineffectual partly because it does not actually require advisers to act on the best interests of their clients, permitting advisers to recommend in-house products when other products may be more appropriate.”
It is so very predictable of the ISA to take this path, I wonder how their own “vertically integrated” advice channels would fair if a spot light was put on them. How about their member funds own reporting of asset valuations (which can be years out of date!) that go to their supposedly better returns. Then there’s the numerous changes they make to their group insurance policies which often put their members in a state of confusion as to what they’re actually covered for, if they get informed at all. I actually think the remit of the Royal Commission was not broad enough. Lets have another crack and focus on the significant default sector which encompasses the ISA membership. It ain’t all roses as they say.
Boy oh Boy !! I think it is now time to STOP the ‘Mud Slinging’ from both sides (and I have worked on both sides) and get on with things. The Royal Commission has unearthed many things which are legacies of an industry which has come a long way in a relatively short period of time. Yes, there are things that need to be fixed and I am sure that they will be dealt with appropriately. But what is being missed in all of this is that there are many, many Planners out there (my guess around 85-90%) who have been doing the right thing and whose clients are happy and have benefited from their dealings with them. I’m not sure how the Planning industry will look in the future but I do expect that it will be drastically different to what it is now as a direct result of the Royal and Productivity Commission findings. The equation should be no more complicated than the 6 Step process to Financial Planning conducted professionally, ethically, with empathy (when needed) and for a (transparent) fee which is agreed between the parties and paid by whichever means they determine. If everyone can get a grip of this then after the initial turbulence created by the release of the Royal Commission recommendations I am sure everyone (including the consumers) will be better off. How about it ?