The Australia-New Zealand Shadow Financial Regulatory Committee has called on the two countries’ governments to reduce tax complexity so advisers can focus on investment strategies for their clients.
In a statement released yesterday, the ANZSFRC made four recommendations to improve the financial advice industry:
Aspiring financial advisors and planners should be encouraged to obtain education in finance or economics to at least the undergraduate degree level.
Governments should aim to reduce the complexity of tax and welfare benefit arrangements and thus the need for such privately advantageous, but with little if any social value, financial advice. Correspondingly, educational programmes for financial advisers should be less skewed towards knowledge of the tax and benefits system, and place more emphasis on investment theory and fundamentals.
The large parents of financial advice groups should consider using a range of monitoring and governance mechanisms such as “mystery shopper” techniques to assess quality of advice, as well as specialist internal audit/compliance arrangements focused on ensuring quality of advice and product suitability.
Governments should investigate the further development of comparison sites, and that financial advice contracts include information on resources available for clients to check risks and costs of advice by reference to such sites before the contract is finalised and advice implemented (during a required cooling off period).
The Committee said education requirements for advisers were "particularly light, especially compared with other professions". It acknowledged that better education was no guarantor of better performance, but said “more extensive, in-depth, and theoretical training in finance and investments would produce higher-quality advice in most cases.”
This is due to emphasis on up-to-date knowledge of tax and government benefit arrangements, and less importance on the fundamental aspects of financial education necessary for good investment advice, said the Committee.
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