Finance minister Mathias Cormann has been lobbied to grant greater enforcement powers over institutionally-aligned advice executives, in the wake of the CBA advice scandal.
The AIOFP has penned a formal letter to the minister – also addressed to ASIC chairman Greg Medcraft – in which executive director Peter Johnston has argued that if the government is “serious about ongoing industry governance” it must implement a regulatory system that treats institutional financial planning executives with the same accountability as individual financial advisers and directors of smaller groups.
“If an independent practice is found to have breached any regulations the practice owners are held to account and generally banned from the industry, effectively destroying their reputation and business,” the letter states.
“[But] if an institution’s advice practice is found to breach the regulations…the institution is ‘named and shamed’ but no individual is held to account.
“Those responsible are generally unknown outside of the institution and they are able to move into another industry role perpetuating the same culture of bad or self-interested advice which was the cause of the problem in the first place.”
Mr Johnston also reiterated the AIOFP’s longstanding call for additional “transparency of ownership of an advice practice”, explaining that in the CBA affair, “consumers who were dealing with Financial Wisdom did not initially know they were dealing with a wholly-owned subsidiary of the CBA”.
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