The credibility of the financial planning industry will once again be put under the microscope following the release of a report which claims advisers are overwhelmingly recommending clients move into superannuation funds associated with the adviser, without even examining the client’s current arrangements.
The Australian Securities and Investments Commission (ASIC) report, released last night, found 90 per cent of 4,900 super switching recommendations examined by the corporate regulator in a statistical review late last year advised a move to a fund run by a party related to the adviser.
A closer examination of 260 of these recommendation confirmed “that there is a risk that the adviser will place their interests or their licensee’s interests over the interests of the client”.
The report also found most advisers gave little or no consideration to a client’s current, or ‘from’ fund when giving a recommendation to switch.
However, the Financial Planning Association (FPA) has challenged the report.
FPA chief executive Kerrie Kelly said it was based on adviser recommendations made before the introduction of super choice on 1 July, and before the release of ASIC guidelines in late June which stressed the importance of investigating a client’s ‘from’ fund.
“ASIC produced its guidance to the financial advisory sector six days before the super choice legislation started,” she said.
“We were very pleased to have that guidance from ASIC, but it did only appear six days before super choice started.”
The corporate regulator will now push ahead with the next stage of its surveillance of advisers – a shadow shopper exercise where consumers will be sent in to gain advice from financial planners.
ASIC acting chairman Jeremy Cooper said the shadow shopper investigation, which would test the superannuation advice given to 300 “real consumers”, had already begun.
“The survey will provide us with a strong insight into a consumer’s real life experience of getting advice, and will provide a better understanding of what they were told, as well as the documents they were given.”
*For full coverage of the report, including industry response, see next week’s Money Management
