ASIC shadow shop finding "cause for concern": Consumer Action Law Centre
By
Ben Nice
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2/02/2012 7:00:00 AM
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8
comments
In further bad news for the planning industry's public image, consumer advocate groups have claimed ASIC’s findings that only 3% of financial plans are good are ‘cause for concern’; they have also hailed the shadow shop initiative as the key to understanding what’s happening on the ground in the industry.
In response to ASIC’s recent dressing down of the financial advice sector, which found that only 3% of financial plans were deemed to be ‘good’ for the client, Consumer Action Law Centre’s (CALC) Gerard Brody said the shadow shop initiative was a good approach to understanding what was happening on the ground for consumers who were purchasing financial products and advice.
“That sort of research and shadow shopping is a really good initiative by ASIC to determine compliance by financial advisers… if they’re assessing that only 3% of financial plans are good, well that’s cause for concern, and we should be looking at how they are being developed and how they can be improved,” he told Wealth Professional.
Many planners have been vocal about the way that ASIC has approached the topic. Eureka’s Greg Cook questioned the objectivity and the timing of the preliminary findings following the ASIC’s announcement in the Parliamentary Joint Committee last week, while ASIC has refused to comment on the issue until the release of the full survey, scheduled for March.
“The timing is up to ASIC, but we think that shadow shopping is a good way to get an understanding about the quality of services and whether financial advisers are compliant with their obligations,” said Brody.
Faced with what Brody described as ‘hard slog’ for the government, FoFA’s opt-in requirement has now been amended to a two-year requirement, rather than an annual process.
Brody said that he understood there were a lot of parties to please and admitted the legislation had been a difficult process for the government to manage. On that basis, he said, CALC were in support of the two year amendment, so long as the reforms were not scaled back any more.
“Our preference has always been to have an annual opt-in, but we understand that this legislation has been difficult for the government and there are a lot of interests that they have to consider. On that basis, we’ve been supportive of the two-year opt-in process, but we wouldn’t want to see it diluted any further,” he said.
“There are some areas where we’ve called for legislation to be strengthened … some of the carve-out areas, particularly consumer credit insurance, where there’s been a lot of mis-selling. We don’t think that those sorts of carve-outs are warranted,” Brody said.
While admitting that the reforms had been a long time coming, Brody praised the government for its hard work, and called on all areas of the government to show their support to help get the legislation enacted.
“Whoever it is [in government], we feel that these sorts of reforms are warranted and should go through the parliament. They’ve been a long time coming, particularly around conflicts of interest, and I think that consumer harm has definitely been demonstrated about some of the practices in the past,” he said.
“We know it’s been a hard slog for the government to get these reforms to where they are and we hope that they continue the work to get them enacted.”
Related stories:
Industry in shock over ASIC "3%" slamming
Pearson's Punch: Diary of a (Shadow) Shopperholic
Poll: The ASIC 3% debate
Latest Comments
Total:
8
comment(s)
Liam on
02 Feb 2012 10:36 AM
ASIC and Brody must know better than financial advisers in Australia from all the time they have spent giving advice and actually dealing with clients. Most clients of Advisers are satisfied with their service and don't feel the need for any change. Some are frustrated by the Government dictating to the client and professional how they must engage from a fee perspective. But politicians who have received a wage all their life, and will receive a generous pension once their time in parliament is up would know best on what clients want, and how we should run businesses. As for ASIC, everytime there is a scandal, their reaction is more compliance and paperwork. No matter how much paperwork you force us to do, there is always going to be crooks in it for a quick buck. It has always been the case, and always will be.
Gully on
02 Feb 2012 11:27 AM
This beggars belief, The compliance disclosure requirements and format in which ASIC require that information to be presented hardly make todays Financial Plans a user friendly document . Interestingly about 3 - 4 years ago ASIC released a draft of what a "simple plan" should look like . Only problem was it failed their own compliance requirements.
Dave on
02 Feb 2012 11:32 AM
Perhaps if they did a reasonable sample (i.e. 1000) they would find some more realistic results.
Every single peice of advice I provide helps put my clients in a better position and I clearly articulate this to them. Otherwise, why would I waste my time or their money?
I know there are some bad planners out there, either intentionally or due to inexperience or the models of their licencees which focus on sales rather than advice, but I would suggest that the majority of planners add significant value through initial AND ONGOING advice.
Sadly, I do see clients of other planners though who have been given SOA's at no cost with typical and standard strategies that don't add much value.
If we are to become a true profession, we need to eliminate FUM/risk based targets and ensure that advisers truly value what they bring to the table and recognise that the advice is what they offer (and should charge for) not the product.
Any planners giving free plans away (i.e. charge for implemnting sale, not for provision of advice) in the hope of getting a 'sale' for FUM/risk need to seriously consider the sort of planner they want to be and who they are working for. % based fees result in the same conflicts.
SM on
02 Feb 2012 11:37 AM
I'm not sure that this shadow shop even looked at compliance. It appears the biggest issues were too much generic infor and inadequate projections which are essentially guesses made on assumptions. Without the full report, there is no mention of client satisfaction or client adviser relationship. It is possible possible to put in place a very good strategy with a generic plan and inadequate projections.
Jay on
02 Feb 2012 12:01 PM
Perhaps smart planners deliberately don't waste their time and energy on shadow shoppers! Hardly a representative survey.
lyn on
02 Feb 2012 12:19 PM
A release of asic findings to this forum without the detail being disclosed is mischievous at this crucial time of debate. Our regulator has placed a doubt of advice across the advice sector without qualification. Conflict of interest is an interesting term that has many interpretations. Greg Cook appropriately challenges the number because without qualification can only be seen as a red herring in this forum .
Jane on
03 Feb 2012 02:14 PM
Interesting that we can have years of commissions and reviews and enquiries and meetings to figure out ways to make the industry fairer and more transparent, and how important it is to address the problems of underinsurance and disclosures so that clients know what they are getting, yet anyone can go online and purchase insurance cover, with no advice, no fact find, no investigations, no comparisons, no statement of advice, no needs analysis, and no idea of who the actual insurer is....and no obligations on the provider because it was done by the client on line, who in most cases has no idea about insurances..
When the proverbial hits the fan in the future when claims are declined, it will fall back on our industry yet again with more regulations....
Can we have someone in government who actually knows what they're doing and can make a decision without wasting millions of taxpayer dollars on endless waste of time commissions and enquiries.
Chris on
03 Feb 2012 06:12 PM
Jane you have hit the nail on the head. The loser out of all this will be the consumer/client. However, as you have highlighted, it may not be for years down the track. Intra-fund and scaled advice are another example of areas where damage will be done. The idea to add these initiatives is just a joke and defies any logic. Year after year additional red tape has been placed in front of the adviser in terms of compliance obligation which has raised the cost to the client coinsiderably. Now they can get advice over the phone?........please. Imagine the quality of advice at the call centre!