FPA welcomes the release of the FSI Report

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The Financial Planning Association of Australia (FPA) welcomes today’s release of the Financial Systems Inquiry (FSI) Report. Many of the Report’s key recommendations align with the FPA’s 10-point plan, set out in May this year, and provide important foundations for better consumer outcomes, improved professional standards for financial planners and confidence in the financial services system.

Dante De Gori, GM Policy & Conduct FPA said: “We are pleased to see a number of the recommendations handed down in today’s report support the financial planning industry as it continues on its journey towards improved professionalism. These recommendations are also critical to ensure the industry as a whole better meets the financial needs of all Australians. Through its members, the FPA stands with Australians for a better financial future. A future that delivers trusted advice.”

In particular, the FPA welcomed the following recommendations of the FSI panel’s final report which align with its submissions and 10-point plan:

Better product regulation

• The need for ASIC to have the tools to better prevent bad products entering the market, as well as introducing new accountability obligations on product manufactures. This includes the recommendation to strengthen product issuer and distributor accountability and the introduction of product intervention powers.
• The recommendation that the removal of regulatory impediments such as tax settings for income streams, in order to provide industry with greater scope for product innovation.

General Advice

• The term ‘general advice’ should be renamed to remove confusion and uncertainty with this term.

Financial Planning Standards

• Financial planner education standards should be raised to a relevant tertiary degree requirement.
• ASIC to be provided with enhanced powers to ban individuals, including officers and those involved in managing financial firms.
• An enhanced Adviser Register, which the Government is already committed to implementing.

Tighter controls on remuneration

• The government consider removing the stockbroker exemption from the ban on conflicted remuneration implemented by the FOFA reforms.

Regulator performance

• The introduction of more effective accountability measures for regulators to better ensure they meet performance indicators and implement their mandates.
• A recommendation to the improvement of ASIC’s funding model by requiring a cost-recovery model from industry and to increase ASIC’s powers against AFSL and ACL holders.

Mr De Gori said: “Though the FPA understands this recommendation, the FPA remains concerned about costs being passed onto consumers creating further barriers to the affordability and accessibility of financial advice.”

“We are particularly pleased to see this response to calls for greater clarity and distinction between general – or product-related – and personal advice. We note the recognition that while financial planners play an important role in making recommendations that are in the clients best interests, they do not develop financial products and therefore can’t be responsible for their failure. Consumers have every right to expect that there has been some level of ‘quality’ check on the financial product, which will also help minimise future product failures.

“The FPA continues to lead the industry when it comes to higher education standards including approved degree requirements. In line with our position, the FSI does not support a National Competency Exam.

“The FSI recommendations cap a watershed year for the financial services industry as a whole. After a year of intense public scrutiny, continued reform and political debate we welcome clear industry-wide recommendations that will deliver better consumer outcomes. Over the coming months, the Government will consult with the industry and consumers, before making any decisions on which recommendations to implement. This consultation process will take place from now until 31 March 2015 and the FPA is looking forward to being a part of this process.”