In an email sent to politicians on Thursday (20 January), seen by ifa, Peter Johnston said consumer savings protection must be a primary issue for every politician and stakeholders in financial service and because of this, change is needed.
“The proposed overhaul of the Corporations Law by the Australian Law Reform Commission is a great step in the right direction, but we need more, we need an overhaul of ASIC’s regulatory process and priorities,” the email read.
“This is not a criticism of current ASIC management; the flawed model has been operating for decades and should have been addressed by successive politicians over the journey.
“With a federal election looming we strongly suggest all major political parties put forward their preferred ASIC operating model for market consideration.”
Mr Johnston also noted the Dixon Advisory group – which filed for voluntary administration this week – who “moved from advice to manufacturing product”, highlighting a need to ban the “profoundly conflicted” vertically integrated advice/product model.
“It ultimately failed for the banks and it has now failed at the other end of the scale when financial advisers try to be manufacturers,” Mr Johnston wrote.
“The market should be clearly divided into advice and product manufacturing, you cannot be both.”
The email continued: “When a financial product fails, ASIC targets the financial advisers who have been recommending it to clients. Considering ASIC release the products and banks/institutions manage them, why in those circumstances is ASIC only investigating the financial adviser?
“We can only assume that forensically investigating why the actual product failed may be too difficult against well-funded manufacturers rather than hapless advisers who relied upon research agencies and information from the manufacturers.”
Mr Johnston, who launched the AIOFP’s “engage and enrage” campaign earlier this month, suggested the three primary reasons for failure is that the product is flawed from inception, it was mismanaged and or failed due to poor market conditions, which he argued cannot be blamed on advisers.
The email concludes: “It is time for change to act in the best interests of consumers and other tax-payers who fund this very imperfect setting.
“It is also time for the regulators to pursue and make accountable those who bring a flawed product onto the market.”
“The market should be clearly divided into advice and product manufacturing, you cannot be both.” According to the arch enemy the Financial Services Council, you can!
The single best thing the Government could do for consumers is to actively remove advice from product distribution. This will allow them to get rid of so many of the useless safeguards and therefore meet their goal of making advice affordable.
Hayne said vertical integration was the root of the problem but failed to address it directly, instead thinking the other 600 pages of legislation would fix it.
Can only guess that he didn’t want to make it to simple, otherwise there wouldn’t be a need for so many lawyers.
I don’t believe that is what Hayne said at all.
He spoke in terms of conflict. This wasn’t just the conflict of product selection but also in terms of commission and other areas of advice where advisers or licensee interests were placed ahead of client interests.
Most value that comes from financial advice is a function of strategy and not product.