The incoming CEO of a non-institutional licensee has supported calls for a royal commission, arguing it could address issues with institutional advice.
Eugene Ardino – who is slated to take the reins at Lifespan Financial Planning in the new financial year – told the Lifespan Conference in Sydney that a royal commission into financial advice was needed to repair the industry’s reputation in the wake of scandals involving major banks.
“A royal commission will be painful in the short term, I acknowledge that, but I think in the long term it could improve our public perception,” he said.
He acknowledged it was unlikely the government would support an enquiry, given the assistant treasurer's opposition, but suggested it would address “major structural issues” within the industry.
In particular, he pointed to "the inherent conflict of interests of institutions giving advice that puts the bulk of client funds into their own investment and risk products."
“If nothing else, [a royal commission] would result in better disclosure of business models and financial advisers having to disclose the ownership structure of their licensee,” he said.
Mr Ardino suggested current ASIC enforcement measures were insufficient to police major banks providing advice services.
“I think the key reason is because paying out tens of millions in compensation or funding EUs, which is very expensive, is a drop in the ocean compared to what they make in their wealth management, platform and insurance businesses,” he said.
“ASIC enforcement doesn’t seem to be able to change the behaviour of institutions at this stage.”
On the other hand, he suggested smaller-scale dealer groups with poor compliance were more likely to be banned by ASIC or go out of business.
“It’s ugly and it’s messy but it sorts itself out eventually,” he said.
Across all ownership models, Mr Ardino suggested a royal commission could help “weed out” poor advisers, pointing to recent FOFA amendments as the first step towards this goal.
“As regards FOFA, a higher level of compliance will cause people to leave the industry and that will probably improve it,” he said.
"That gives you an opportunity because it will increase the demand for your services if you're doing the right thing.
“Regulatory change purges the industry. It’s a cleansing event and I think that’s a positive in the long term.”
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