The FPA’s proposed plan to raise professional standards will give ASIC powers to “shoot and ask questions later” and ignores the conflicts of vertical integration, according to the AIOFP.
As part of the association's campaign to separate product information from financial advice, the FPA last week unveiled a white paper outlining 10 initiatives designed to achieve this policy outcome and raise competency standards in the advice industry.
Reflecting on the rival lobby group’s white paper, the AIOFP – which represents chief executives of non-aligned dealer groups – has raised a number of concerns with the plan, which AIOFP chief executive Peter Johnston intends to take up with the federal government.
In an email communication to members, seen by ifa, Mr Johnston raised concerns in particular with the FPA’s suggestion that ASIC be given “suspension powers for financial planners/advisers suspected of material and systemic breaches of the best interest duty”.
“This is a blatant denial of natural justice where the initial damage caused by an ASIC investigation in the media causes irreparable damage to the practice and its reputation with consumers and the industry generally,” Mr Johnston wrote, adding that the proposal would give the regulator the power to “shoot and ask questions later”.
“If the adviser has the resources or energy to challenge the decision in the [Administrative Appeals Tribunal] their practice and reputation has been destroyed, even if they win they lose,” he added.
More broadly, Mr Johnston said the 10-point plan – which he described as the “imposition of measures to try and create a perfect market for advice” – was flawed since it did not take into consideration conflicts of interest and in-house product bias in “vertically integrated institutional models”.
“There is no mention of any measures being imposed for institutionally-aligned advisers to be transparent with consumers on the ownership or alignment of their practice and the likelihood of what will be influencing the advice,” Mr Johnston wrote.
“These groups masquerading as independents need to be exposed to inject some integrity back into the market's image with consumers.”
The AIOFP is joining the Boutique Financial Planners association – members of which are all also members of the FPA – in calling for additional licensee parent company disclosure rules.
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