Paying for the sins of the few
The Australian financial planning industry has a problem. On all the available evidence, levels of litigation relating to financial advice are rising and the reputation of the industry stands to be seriously undermined.
If any evidence were needed of the problems confronting the industry, one need only read the submissions to the Parliamentary inquiry investigating Storm Financial, view the latest statistics released by the Financial Ombudsman Service (FOS) and consider this edition’s report quoting financial services lawyer Peter Bobbin referring to the number of people seeking legal redress against planners.
No one should be terribly surprised by these events. It was always a given that as investors came to terms with seriously adverse returns they would look for someone to blame. Planners should not be surprised that they now find themselves in the firing line.
What can the financial planning industry do about this? Clearly it cannot do a lot to help those planners who have obviously failed their customers through the provision of bad or inadequate advice. But neither should it seek to disown those planners, either.
Ultimately, the industry must take ownership of the problems, place them in the appropriate perspective (a comparatively small number of planners have failed their clients) and seek to move forward.
Then, too, the media needs to accept that the industry is broader than just the Financial Planning Association (FPA) and its members. There needs to be an understanding that while the FPA is the dominant organisation, it is not the only organisation.
All of this does not alter the fact that there have been systemic and regulatory failures and that those failures must be addressed by not only the industry itself but also the Government and the regulators.
Those in the financial planning community who believe that the industry can be left to resolve its own issues are deluding themselves. That all changed with the collapse of Storm Financial.
Financial planners must accept that, for better or worse, regulatory change is inevitable. Why? Because a minority of planners have let the industry down.
- Mike Taylor
AUTHOR
Mike Taylor
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