There is scope for significant improvement in the provision of good quality retirement advice in Australia, if a recent report from ASIC is anything to go by. The regulator’s shadow shopping study found that there are several areas where the financial advice industry needs to lift its game.
Specifically, ASIC noted that too much poor advice provided to its shadow shoppers was overly product-focused and not strategic enough to help clients develop a realistic and achievable plan for their retirement. Furthermore, ASIC saw examples of conflicted remuneration structures, such as product commissions and percentage asset-based fees, impacting on the advice and recommendations, and on the quality of advice.
A recent Roy Morgan Research report, Superannuation and Wealth Management in Australia, also found that Australians continue to remain confused about planner independence when it comes to selecting financial products when it comes to the “Big 6” financial planning groups.
Advisers are important gatekeepers who play a key role in helping clients plan and manage their finances, and ASIC highlighted the importance of the industry removing conflicts of interest and in improving overall professional standards to ensure that their client’s trust is not misplaced (something that will be interesting to watch with associations with ‘approved-by-AISC’ codes of conduct being exempt from opt-in under FoFA).
However, with increased consolidation underway in the financial planning practice sector and the big players in the industry looking to consolidate and build their revenues, the pressure is on non-independent planning practices more than ever before. It’s easy for ASIC to come out and say ‘remove conflicts of interest’, but the reality of this is easier said than done.
