The Government’s long-awaited response to the Trio report has been welcomed by the industry, but a few decisions have not impressed the major associations.
SPAA education and professional standards director Graeme Colley said that some aspects of the two reports’ recommendations should go further than their original proposals, such as a last resort compensation scheme, and the SPAA is waiting to see how compensation arrangements for clients will be carried out.
Colley said SPAA was disappointed by the Government’s decision on the last resort compensation scheme for the financial services sector by accepting St John’s advice that such a scheme would be “inappropriate and possibly counter-productive”.
“SPAA will continue to advocate for such a scheme where clients have suffered financial losses because of the misconduct or insolvency of an AFS licensee, and that the compensation should be funded by a levy imposed on that sector of the industry where the misconduct occurred.”
Addressing the FPA's thoughts on the Governments’ response to the Richard St John report, CEO Mark Rantall also believes the Government needs to do more.
He said the obligations on the licensed financial advice community have been ‘unbalanced’ in comparison to the light-handed regulatory approach of product issuers, as highlighted by St John. But the Government had much more to do to align with St John’s report.
“The FPA does not support the notion that financial adviser misconduct is the only reason why compensation has been awarded to date. We believe that this ignores the role played by other gatekeepers in the value chain in consumer losses, something Richard St John highlighted in his report.
“The problem is that the only, and the easiest, source of compensation for consumers is through the financial adviser and accessing compensation from other gatekeepers such as product providers, directors, auditors is not possible, too difficult or requires a class action – and this is part of the problem.”
The FPA has also said they do not support some of the Government’s recommendations for Professional Indemnity Insurance (PII) changes stating that increasing PII requirements will not solve the problem, but simply increase costs and further restrict financial advisers in servicing consumers due to increased costs and red tape.
Tria Investment Partners managing partner Andrew Baker said, “Conflicted advice implicitly seems to get much of the blame for Trio, but other fundamental issues have been rather whitewashed.”
Baker said the picture was left incomplete and regulators were “(dubiously) absolved of blame.”