The Governance Institute of Australia is calling for advisers to undergo mandatory testing, following a recommendation from the Australian Securities and Investments Commission (ASIC).
Formerly known as Chartered Secretaries Australia, the organisation is supporting an ASIC proposal to government that would see compulsory testing for all new and existing advisers on tier 1 products; monitoring and supervision of new advisers; and an online update review for all advisers every three years.
Under ASIC’s RG 146 guide, tier 1 products encompass all financial products not held under the “simpler and better understood” tier 2 products, which are subject to lighter training standards.
“There are continuing ongoing examples of where rogue financial planning advisers have cost mum and dad superannuates dearly,” Governance Institute chief executive Tim Sheehy said.
“Many will never recover from the likes of Westpoint, MIS and, most recently, CBA financial planners.”
“The reality is that the financial advising sector hasn’t stepped up to the plate in terms of ensuring its operatives have the knowledge and skill to provide quality financial advice.”
The Governance Institute said a 2011 investigation by ASIC tested the quality of financial advice and found that only 3 per cent of plans were of “good quality”, while 23 per cent were found to be “poor”.
Mr Sheehy said if the industry wants to be seen as a profession, it is important that “rigorous educational requirements” apply.
“Virtually every recognised and respected professional services body demands extremely high levels of professionalism of their members,” Mr Sheehy said. “Unfortunately, this is not the case in the financial advising sector and ASIC’s proposal for mandatory testing should be adopted.
“The future financial wellbeing of Australians should not be comprised by poor advice and advisers must accept that ongoing quality education and training is critical if they are to be effective stewards of their sector.”
In addition, the Governance Institute recommends the sector introduce a mandatory code of conduct under which members who do not comply are expelled.
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