CFA Societies Australia and the CFA Institute today released policy recommendations in response to the royal commission in a report, titled Professionalising Financial Advice, which was developed following extensive consultation with CFA Societies Australia Advocacy Council and other investment management industry leaders in collaboration with the global CFA Institute advocacy team.
Lisa Carroll, CEO, CFA Societies Australia said the association strongly believes that customers should be made aware of the ownership structure or exclusive product relationships that advisers may have with other organisations.
“At present, we think that a ban on vertical integration is not warranted, however, it should remain under active consideration based on an assessment of the progress made,” she said.
In the report, CFA Societies Australia and CFA Institute call for the set-up of an independent industry body that individually registers and monitors its professionals to ensure ongoing and long-term professionalism of the financial advice industry as a recognised profession.
It also proposes a series of policy reforms and structural changes that should run simultaneously to improve outcomes for customers accessing financial advice and rebuild trust in the industry.
Stephen Dunne, chair of CFA Societies Australia Advocacy Council, highlighted the significant opportunity to professionalise the industry in response to the findings of the banking royal commission.
“The interests of firms were often put ahead of the interests of customers, leading to compromised outcomes for customers which severely diminished confidence in the investment industry and caused loss of trust in its professionals,” he said.
“We believe the future of the industry depends on policy reforms aimed at professionalising the industry regardless of which party is in government post 18 May.
“All industry stakeholders including the government and regulators must work closely to take decisive, visible and impactful actions that address these issues and rebuild investors’ trust.”
The policy recommendations report highlights that a genuine long-lasting impact cannot be achieved with a single solution. Rather, a series of policy reforms and changes should run simultaneously to improve outcomes for customers including strengthening best interests duty and ensuring appropriate consequences; outlawing conflicted remuneration practices; ensuring independence of advice; and enhancing the professionalisation of the financial advice industry.
“We strongly recommend that the grandfathering of commissions be outlawed within next 12 months. This allows firms to take a short sunset period to adjust, and customers of financial advice firms to see actual changes taking place. Further transparency and disclosure need to be offered to customers around all fees and costs that they may incur including adviser remuneration and platform fees,” Mr Dunne said.
“For policy to deliver positive outcomes, the remuneration of both advisers and senior executives should be aligned to the interests of customers. This requires banning ‘product pushing’ and rewarding ethical practices and decision making.”
CFA Societies Australia and CFA Institute also hold the view that the duty to act in clients’ best interests should be an imperative commitment made by all advisers.
“We believe policy needs to establish strong deterring consequences for those who act against the interests of customers, including suspension or banning from the industry. In the long term, the industry should aspire to a principles-based approach to managing adviser-customer relationships, and the adoption of the fiduciary duty standard should be considered,” Mr Dunne said.
@perplexed. no one knows who they are much in Australia. they are big in Asian countries and other places where people are hungry for a designation. very basic study required, mostly multi choice exam except for level iii where there are response type questions, even the cfp in Australia only give their 3 level program 1 x credit
most of us with a masters degree have done far deeper study than this but it’s good for third world country citizens desperate for designations to validate their existence
Has this CFA Institute actually read the FOFA requirements? Some of their proposals are already in legislation. Not sure how you can make “Best Interest Duty” any more enforceable. All Fees have to be disclosed to clients already.
This is just publicity seeking for another irrelevant body.
I had to google the CFA Institute.
It’s a bit like the Auskick kid explaining to an AFL footballer how their industry should be run.
Slow news day?
cfa society should take over both the fpa and afa
Vertical Integration was considered by Hayne as too difficult to change or do anything about??? because??? why??? I’ll take a guess… The big 6 have so much money and power that they have lobbied all sides of government, ASIC and Hayne. This has influenced Hayne to do and say nothing! The professional unbiased advice, that clients should receive; remains captured by the big 6. Advisers remain as disguised sales distribution arms of the large product manufacturers. Of course when things go wrong? the licensees’ who are impostors for advice blame the adviser! What a neat little scheme this is!
Great – start with Industry Funds who are the most conflicted vertically integrated product pusher of all!
will vertical integration limitations also apply to Industry Funds or will they be exempt as per usual?
Products and advice should carry the same name as the parent company. Truth in labelling will help consumers understand exactly who is who and who is making money from their transaction. Displaying it in the fine print or deep in the disclosures is still a method of hiding the fact that someone is being paid more than once.