Have the days of dodgy financial advisers gone?
Clients may be under the impression that all financial advisers are dodgy – willing to push the needs of their clients aside to cut a healthy commission for themselves. Fortunately, with the new regulatory body, FASEA, that practice will hopefully be put to rest.
I'm looking forward to a time where a few unscrupulous operators can no longer tarnish the whole financial services industry with the one dirty brush.
The financial advice sector has been working hard to right these wrongs. Not only have individuals and their employers been disciplined, the profession has also set about targeting the education standards of advisers and the ethics they subscribe to.
If the quality of advice given to clients is improved, then it follows that investment strategies should better achieve an individual’s financial goals and objectives.
So it pleases me to see that the Australian government has established a new body that will be responsible for governing the conduct of professionals in the financial advice sector. The Financial Adviser Standards and Ethics Authority (FASEA) will set mandatory educational and training requirements for financial advisers, develop and set a national industry exam and create a code of ethics that all financial advisers must adhere to.
One of the educational requirements changes dictated by FASEA is particularly pleasing. FASEA intends to lift the educational level of financial advisers to a minimum degree qualification. Thank goodness. Because who in their right mind wants to place their finances in the hands of a novice?
In my opinion, the FASEA changes are a step in the right direction to restore faith and lift the level of professionalism in the sector as a whole. Hopefully this will mean the types of scandals that have rocked news headlines in recent years will be a thing of the past.
However, as Hewison Private Wealth’s chairman and founder John Hewison recently acknowledged, what has been missing in relation to financial services regulation in the past is a lack of enforcement and co-operation by the government and regulators; the Australian Prudential Regulatory Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
So until this happens, individuals have an important role to play in terms of determining who they choose to provide their financial and investment advice.
Clients need to keep away from the instos
What’s most important in a client and financial adviser relationship is ensuring the client's best interest.
This is where financial advice subsidiaries of institutionally-aligned investors like the banks are flawed.
Think about it like this – it’s unlikely a client would walk into a shop and choose the first product offered to them by the salesperson without first comparing it to similar products to ascertain which best suits their budget and needs.
However, this is essentially what happens when a client approaches the financial advice arm of a bank. The adviser will generally recommend a product aligned with its brand.
If clients are after advice that is truly aligned with their goals and objectives, they need to make sure the person providing that advice is independent. Independent financial advisers exist to provide clients with independent, unbiased advice. They are committed to achieving positive outcomes for their clients and operate under their own Australian Financial Services Licence (AFSL). Further, they’ll they charge a fee for service and do not accept commissions.
Simon Curtain is a director and private client adviser at Hewison Private Wealth
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