The financial planning industry has broadly welcomed the findings of the so-called St John inquiry into compensation arrangements for the financial planning industry, and in particular, its conclusion that a "last resort" compensation scheme is not needed at this point.
The findings of the inquiry – conducted by Richard St John – were tabled by the Minister for Financial Services and Superannuation, Bill Shorten, who called for further industry submissions on the findings and flagged providing a final government response within the next three months.
In tabling the report, Shorten said it "had acknowledged the reality that regardless of how stringent the regulations surrounding the provision of financial advice are, there are times where things do go wrong, and appropriate avenues for compensation need to be available to retail consumers".
The minister noted the key findings of the report as being:
- Retail clients are generally able to recover compensation for losses attributable to misconduct by licensees except where the licensee lacks the resources to meet those claims.
- It would be inappropriate at this point in time to introduce a "last resort" compensation scheme without first strengthening the existing compensation arrangements.
- Strengthening the existing compensation arrangements, including ensuring professional indemnity insurance adequacy and greater ASIC monitoring.
- Greater responsibility being taken by product issuers for protecting consumers.
Commenting on the report findings, Financial Planning Association chief professional officer, Deen Sanders described it as a thorough review, but particularly welcomed the fact that it had not rushed towards the delivery of a "last resort" scheme.
"In other words, the report recognises the obligations of the licensed financial advice community have been unbalanced in comparison to the light-handed regulatory approach to product issuers," he said.
