The financial planning industry will face a wave of criticism after the release today of a damning report on the quality of financial planning advice.
The report, the result of a year-long investigation into the planning industry by the Australian Consumers’ Association (ACA) and theAustralian Securities and Investments Commission(ASIC), claims more than half of all financial plans prepared by advisers are ‘borderline’ or worse.
The investigation involved consumers secretly approaching advisers to obtain financial plans, which were then tested by a panel of industry experts.
The report says only two out of a total of 124 plans were considered ‘very good’, while 23 where considered ‘good’ and 36 ‘okay’.
The remaining plans were considered ‘borderline’ or worse, including 21 that were rated ‘poor’ and 12, from 10 different groups, which were considered ‘very poor’.
The chief executive of the ACA, Louise Sylvan, says the report’s findings prove the overall quality of financial planning advice available to consumers is “abysmal” and that urgent reform of the financial planning industry is needed.
She says none of the planning groups examined as part of the investigation are good enough to recommend.
“I think it is really an abysmal set of results,” she says.
“We wanted to be able to direct consumers to advisers who would do good by them. But based on these results, we are unable to make any recommendations,” she says.
The executive director of consumer protection at ASIC, Peter Kell, says the regulator will examine each of the groups named in the report as having produced ‘very poor’ plans.
The groups include the ANZ Bank,Securitor,Charter,AMP, Bell Potter,PACT,JB Were,Protax,Tolhurst NoallandMawsons.
“In the past two years, ASIC has removed 62 financial advisers from the industry, and a further 10 have received jail terms. We will be carefully assessing the information from the survey to determine whether any enforcement action will be taken,” Kell says.
He says the report raises serious regulatory issues for financial planners and their dealer group.
“The survey is a wake-up call to the financial advising industry that improvements are needed and in particular, that more consistent quality needs to be achieved,” he says.
But theFinancial Planning Association(FPA) has rejected that serious reform of the financial planning industry is needed.
The association’s chief executive, Ken Breakspear, says the ACA has used “inflammatory language which has politicised the survey results”.
“The FPA strongly objects to the unsubstantiated statements made by the ACA which go beyond a factual and objective presentation of the results,” he says.
“We do not need further major changes to our industry standards.”
But the ACA says the survey findings are the last straw, after similar studies in 1995 and 1998 also produced uncomplimentary results.
“This test, which has produced a disappointing result, raises the question of whether the industry can continue to be structured the way it is,” Sylvan says.
