In its official submission to the inquiry into the performance of the corporate regulator – an initiative which in part was in response to parliamentary concerns over ASIC’s handling of poor advice given by Commonwealth Financial Planning advisers – the bank called for greater checks and balances on individual advisers.
“Notwithstanding the positive impact that the FOFA reforms are having on the financial planning industry, CFP advocates that consideration should be given to ensuring that those licensed to give financial advice are of good character,” the submission stated.
CBA called specifically for a registry of financial planners and “the introduction in Australia of a financial planner passport scheme similar to the one operating in the United States”, which would force individual advisers to carry an identity card detailing their “experience and conduct within the financial services industry”.
This passport scheme should be administered by ASIC and funded by the industry itself, the submission argued, while also expressing “regret” for the inappropriate advice given by some Commonwealth FP planners.
Reflecting on the proposal, Joe Ruzzi, a Perth-based consultant and former ASIC official in Western Australia and Canberra, told ifa the call for a passport scheme is misguided.
“The last thing Australian financial planners should be doing is to look to the USA for guidance,” Mr Ruzzi said.
Rather than a passport scheme, the former regulator proposed alternative reforms including that “no provider of financial advice should be employed, engaged, contracted etc. by a product provider” and that the compensation options in the industry should be reviewed.
A number of ifa readers also commented on the story, many voicing their opposition to the need for such a scheme.
One commenter suggested that CBA would be “required to check that their advisers meet ASIC educational standards and make reasonable character checks” before taking an adviser on as an authorised representative, thereby making a passport scheme redundant.
Another questioned whether ASIC would be up to administering such a scheme, considering it can’t “regulate what it does now”.
Others were more forthright: “Fix your own backyard first CBA – too little too late”, said one. “CBA pretending to be the “white knight” of the industry? A joke,” said another.
Another unnecessary impost when the real issue has to be about increasing education and therefore increasing barriers to entry. All of these solutions are just treating the symptoms and avoiding dealing with the cause
Joe Ruzzi makes two very sounds statements:
1. The last thing Australian financial planners should be doing is to look to the USA for guidance; and
2. no provider of financial advice should be employed, engaged, contracted etc. by a product provider
The CBA’s “passport” would be a way to get rid of the small Dealerships by imposing additional costs on them.
The largest number of problems in the industry seem to originate, or involve, the Dealerships that are owned by Product Providers but the harshest penalties are handed out to those that don’t have in house products.
If a small Dealership has an Adviser, or two, who does the wrong thing it seems they are shut down or given impossible operating conditions. If it is a large number of Advisers at a product provider, think AMP, they get a slap on the wrist and a weak Enforceable Undertaking.
Separate Advice and Product and most problems will be solved.