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.”
I wonder if Lifespan will give all its adviser firms a 2-3 year licence fee holiday to help them cope with the “short term pain” of a Royal Commission? Anyone with an ounce of common sense can see that a Royal Commission will be cynically misrepresented by Fairfax and the unions to destroy the reputation of ALL financial planners, not just the minority of wrongdoers. Did Ardino jnr get his job on merit, or nepotism?
So it is alleged that in the major banks put pressure on the adviser for fees, fees and more fees. This is where the scandals start! Crap advice, product flogging, ethical issues and pure trash is what is eventually sold to the customer. Ethical financial planners simply see the trash over and over and over again!
Conflicts in every profession, doctors, optometrists, audiologists, lawyers, accountants…..but we work in FINANCE which attracts a lot of attention and fighting between so called not-for-profit entities and profit making entities which then becomes political due to a massive fee generating superannuation pool. See where it’s heading…nowhere fast.
What exactly do you expect a Royal Commission to uncover that we don’t already know? Feeding frenzy from class action lawyers, that’s what will happen.
Gerry, imagine if 80% of doctors worked for drug companies…..
Lets hope that, with time, more advisers have the courage to seek real independence, and give up the few shekels and bits of glitter offered by the institutions, that are collectively destroying our reputation.
Real independence isn’t a choice to be made by clients, its a choice to be made by advisers.
Mr. Ardino states “that a royal commission into financial advice was needed to repair the industrys reputation in the wake of scandals involving major banks”.There is no crisis , and they only people pushing this are the hack reporters in the Fairfax stable who have been flogginig this horse for 12 months . Granted there are some ordinary practioners , but you will find that in every profession. Case in point is the NAB who are currently being flogged by Fairfax. They have sacked 2% of their adviser network . That is miniscule when you consider there are 1700 advisers in the network . Does anyone really think that if you hold a R.C that the banks will get out of the wealth managment business ?
Why should they ? We are independent advisers who often come across “bank advice ” . In all honesty there is nothing wrong with the advice apart from being very expensive, and the advice is driven on the premise of covering ones butt .
I absolutely agreeWe should have a Royal CommissionIf the Government is serious about cleaning up the industry; a Royal Commission is the only way to go.
It will weed out most of the problems and let the honest hardworking Adviser get the job done.
In an attempt to clean up the industry, ASIC has imposed so many regulations that the genuine adviser cant do the job properly any more.
No matter how many forcible undertakings ASIC imposes on the banks and no matter how large the fine, it is like water off a ducks back.
Also, it would put the spotlight on the industry funds, particularly those connected with the unions.
Anyone who tries to differentiate their offering based on being non-institutionally owned is dreaming.