Despite the speculation that David Murray’s inquiry would go easy on the banks, small business financial advisers – and their clients – have been big winners in the FSI final report.
A man not known for biting his tongue, former Liberal Party leader John Hewson told ifa in a recent interview that a “climate denying banker” was simply not the right choice to lead a wide-ranging deep dive into the nation’s financial future.
While Dr Hewson’s headline-grabbing description may be a step too far, the economist and former pollie was not alone in expressing cynicism that the Murray Inquiry would do anything about the systemic problems in financial services.
And yet, should the recommendations be implemented by the government, the end result may actually be a playing field more advantageous to financial advisers.
For decades advisers have taken the fall as their managers or owners set KPIs that may not always have good advice as their outcome or flooded the market with sub-par financial products.
But that could all be changing as the FSI recommends beefing up the obligations on product providers and expanding ASIC’s powers over the big end of town.
Describing the recommendation as a “paradigm shift”, Mr Murray said the new “targeted and principles-based product design and distribution obligation” would see product issuers and distributors required to look beyond profit and shareholder returns to the consumer interest.
In addition, it argues ASIC should be given greater powers to intervene in the financial product distribution chain, including greater scrutiny of PDSs and even the power to ban products from the market altogether.
The report also recommends that ASIC's funding and scope be ramped up so it can better investigate senior managers and executives, while also proposing a new regulator for the regulator.
If enacted, this would see a fundamental change whereby intermediaries are no longer the instinctive fall guy in financial services and product failure is no longer masked as “advice failure”.
The recommendation to re-embrace more explicit disclosure of AFSL ownership is also a win – at least for those that support transparency – and will aid the task of rekindling the relationship between advisers and the non-advised public.
Similarly, the increased education and restrictions on risk commissions recommendations may result in short-term pain for some advice businesses, but ultimately will help aid consumer trust - if not consumer outcomes - and are therefore appropriate and healthy.
Overwhelmingly – and perhaps surprisingly – the FSI report reflects a more mature and sophisticated view of advice than is usually seen from our top business leaders.
The pendulum is swinging away from the mighty institutions to small business advisers and their clients, and – should this trend continue – perhaps the politics and scandal of recent years may have all been worthwhile.
Having said that – as we have just seen with FOFA – the government’s task of implementing the findings will not necessarily be an easy one.
Let’s all hope the motley crew of crossbenchers currently holding Canberra to ransom give it a thorough read.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 20 Jul 2018CPA shuts financial advice divisionBy Reporter
- 20 Jul 2018Don't neglect AI, advisers warnedBy Tim Stewart
- 19 Jul 2018AMP unveils new in-house training programBy Reporter
- 19 Jul 2018Self-licensed adviser cops 4-year ASIC banBy Reporter
- 19 Jul 2018Hub24 to launch new core offeringBy Reporter
- 19 Jul 2018SMSF sector warns about advice ‘exodus’By Miranda Brownlee
- view all