Product manufacturers must be held accountable for problems that have arisen in the financial planning industry, says Finsa's chief executive.
Speaking to ifa, Financial Services Institute of Australia (Finsia) chief executive Russell Thomas said more obligations should be placed on product manufacturers.
Finsia was one of the few organisations that lobbied for the 'upstreaming' of obligations to the product issuer level in the Financial System Inquiry consultation process, Mr Thomas said, noting that Australia has a highly vertically-integrated financial services industry.
"The largest institutions have a deep penetration of the wealth management arm. They have a significant influence on the entire value chain," he said.
"By bringing that obligation upstream, it would focus institutions in a more deliberate way on improving the integrity of that chain – but we need to make sure that 'vertically integrated' means what it says.
"Groups [must be] producing products that are safe, that are economic and are appropriate for their classes of investors," he said.
Technology can play a very important role in the new environment, Mr Thomas said – the big banks are in a "better place than anyone" to know their customers in detail.
"But [product manufacturers] have to take that extra level and to be able to ensure that the products that are made available to [customers] are safe and appropriate," he said.
Part of the problem for the industry stems from the fact that "we have yet to bed down the regulatory response for adviser and financial planners", according to Mr Thomas.
"Everyone's responsible for that – not just the government – and the longer that has gone on, the more we run the risk of implementing a solution for the last decade's problems.
"Demographics are changing, the way people are receiving financial advice is changing. The financial planning model in Australia is very much a model built around the baby-boomer demographic," Mr Thomas said.
The move into digital offerings for financial advice and wealth products, while in its infancy, is "clearly" a more cost-effective and appropriate channel for many Australians.
"But our regulatory attention is not focused on getting those models right; it's still focused on the advice space and the financial planning model," he said.
"So the focus, I think – and we're all to blame for that – has been too much on one end of the value chain."
Finsia emphasised product obligations in its response to the FSI. However, Mr Thomas said this focus has not got the traction it deserves.
"It would be an enabler for institutions to get their product and their advisory channels better aligned," he said.
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