A proposal to rename general advice as "sales" or "product information" is not an adequate solution to the problems that arise from conflicted remuneration, according to the Financial Ombudsman Service (FOS).
In its submission to the Financial System Inquiry (FSI), the FOS warned that the proposed renaming of general advice could lead to "the re-emergence of a commission driven sales culture of the type that existed in the tied agent arrangements in insurance and financial advice prior to changes in regulation in the mid-1990s".
FOS also raised concerns that consumers could be unable to distinguish between sales, product information and general advice, if the FSI proposal went through.
"The introduction of any such distinction would require careful review of whether it was necessary to introduce further requirements that certain types of complex products can only be sold to retail customers on an ‘advised only' basis," FOS said.
"This would introduce a new set of complexities into the regulation framework for consumers to navigate."
While had concerns over the proposal to rename general advice, FOS was largely supportive of other views raised in the FSI's interim report.
"FOS supports the views of the inquiry on the impact of conflicted remuneration on the ability of consumers to access advice they need and can trust," FOS said.
"FOS also supports industry and regulatory initiatives to improve competency, training and professional requirements for advisers, and the concept of a register of individual advisers."
The FOS submission also recommended increasing the Australian Securities and Investments Commission's (ASIC) powers to enable "early supervisory intervention in order to limit serious conduct problems".
"This would require a regulatory philosophy that combines an early intervention ‘supervisory' approach with a strong focus on enforcement when the law is breached," FOS said.
"The UK regulator has powers to appoint an external party to undertake an independent review of a firm's activities (which, for example, cause concern or require further analysis).
"We recommend a similar power should be considered for ASIC."
