New financial planning regulator already hostage to vested interest?
WHILE lawyers, doctors and accountants regulate themselves, financial advisers have never been able to get it together. That is remarkable. Particularly the legal and medical professions are no strangers to respectively overcharging and over servicing, yet there are no plans to set up a statutory regulator for them.
However, the Australian Government has set one up for financial advisers, the Financial Adviser Standards and Ethics Authority (FASEA).
The long history of malpractice by financial planners was an important reason for holding the Banking Royal Commission in 2018. Unfortunately, the Royal Commission did not ban the practice of financial advisers being salespeople for the financial products of their employer.
At the heart of all the scandals were the conflicted payments that still dominate the industry and encourage planners to put their own interests ahead of their clients’.
FASEA is raising education standards for financial planners.
From 2027, all planners will have to be degree qualified, have completed a professional year and passed FASEA’s exam.
Planners now are already sitting the exam, which includes a heavy emphasis on ethics, as covered in FASEA’s Code of Ethics. This Code includes a ban on accepting any payment where there is a conflict of interest.
Strangely enough, FASEA says that this does not mean a ban on commissions paid by financial product providers to financial advisers.
If there is one textbook example of a conflicted payment, a commission is it.
Campaigners for genuine fee-for-service are appalled, accusing FASEA of sitting on the fence and caving into the lobby groups.
FASEA denies this.
Fact is: conflicted payments live on.