Speaking to ifa, Mr Ripoll – who is widely regarded as the architect of the FOFA regime, having chaired the inquiry that led to it – said the best interests duty was not a complex law, and the court ruling last week that NSG Services pay a $1 million civil penalty shows advisers will need to pay attention to the law moving forward.
“ASIC’s finding and the subsequent penalty serves as a message to the advice industry,” he said.
Most advisers will be relatively unaffected by the ruling, Mr Ripoll said, as they “genuinely have their clients’ best interests at heart”, but that having the law tested will provide clarity to many on both the law and its boundaries.
When asked what kind of response he’d like to see from judges regarding the FOFA reforms, Mr Ripoll said he wanted to see proper application of the new laws.
“I don’t want to see a hard line or a soft line on this, I want to see a change of culture and a change of behaviour within the industry,” he said.
In a statement released today, ASIC deputy chair Peter Kell concurred with Mr Ripoll’s assessment that the court has sent a strong message.
“This outcome makes clear to the industry the serious consequences of financial services licensees failing to comply with their FOFA obligations,” Mr Kell said. “ASIC will continue to pursue licensees who fail to do so.”
Former regulatory investigator Brett Walker of Smart Compliance told ifa the court decision was a “shot across the bow for all who think they can avoid the responsibility to put client first”.
A shot across whose bow! A couple of `raw ‘ advisers who learnt all they knew from the licensee get banned, the licensee gets to carry on business but under a different trading name and the ability to pay the fine is no doubt aided by the remuneration from future / ongoing clients. All fine and dandy, right!
We all know the monthly ‘service/monitoring fee’ is there to justify the monthly ongoing commission payments.
If you want to improve Advisers behaviour how about starting by fully explaining what the ‘Best Interests Duty’ breach actually was.
Most advisers might think they have their clients best interest at heart but a lawyer armed with his tools and his % based success fee will throw the weight of their whole firm behind a court action knowing the said adviser or his firm has PI cover and litigate the pants off you proving beyond a shadow of a doubt that most of you could have done a far far better job at placing your clients best interest before yours.
I shudder to think how every single financial planner can justify charging every one of their clients a “fee for service” regime and pretend they are A) monitoring the portfolio of their whole book of clients and B) Defend why that multi thousand dollar fee is in their clients best interest.
Making your business model work for you due to compliance cost is not in your clients best interest. A lawyer is going to tear you apart in years to come and outsourcing your portfolios to managed funds and etf’s won’t justify a monthly fee from you the adviser for some hand holding, birthday cards and a yearly golf game. Financial planning is hog tied to complexity, red tape and huge compliance cost due to stealth tactics of the FPA and the AFA keeping quiet letting these tactics get passed.
This industry is a disaster for clients and advisers. It needs massive change and education standards are the last of its problems.
Steven, I have clients paying $3,500+ pa and they are so happy with the service they refer friends and family. Most advisers I speak to say the same thing. Demand is strong. The funny thing is, the same clients grizzle about a $300 fee charged by their accountant each year. I guess if they see value in the service and you deliver on your promises, clients will pay for it.
Here we go again with your rant about fee for service being a rip-off. Guess what, no one is forcing you, or anyone else for that matter, to be a part of it. If you don’t like it, don’t pay for it. But just because you don’t like it doesn’t mean that it is bad for everyone and should be banned. That kind of thinking belongs in Soviet Russia, not Australia.
I partly agree with you – advisers tend to overcharge their clients, but only because the quality of the advice is considered poor for the fee charged. Clients can generally see a financial counsellor or Google to get the info they need. Most advisers do insurance/super, and charge a whopping fee for it. But some advisers provide excellent advice, do proper fact finding, and charge an appropriate fee, because their clients’ willingness to pay meets the quality of advice. Advisers have to understand that clients know what quality is, and will (and SHOULD) expect more from their advisers in the future. I am excited for the industry and what it holds in the next 5 – 10 years. It will only get better, and eventually the bad advisers will move out of the industry into one where they belong, selling cars/real estate. The good ones will continue to take their clients on a journey of financial success.