The Financial Planning Association (FPA) has hit back at the Government’s claim that financial adviser misconduct is the only reason why compensation has been awarded to victims of the Trio Capital collapse to date.
While the FPA supported the Government’s responses to the Parliamentary Joint Committee’s (PJC’s) Trio inquiry, chief executive Mark Rantall said it needed to do more when it came to the findings of the Richard St John report into compensation arrangements for consumers of financial products.
Specifically, Rantall said the Government’s response had largely ignored the role played by other gatekeepers such as product providers, directors and auditors because “the only, and easiest, source of compensation for consumers is through the financial adviser”.
“The FPA fully supported the thorough report by Richard St John, originally announced in May 2012, and we believe the report recognised that obligations on the licensed financial advice community have been 'unbalanced’ in comparison to the light-handed regulatory approach of product issuers,” he said.
While Rantall said the Government had taken some of these recommendations on board, the FPA did not support the notion of increasing professional indemnity (PI) insurance requirements as it would not solve the problem but simply increase costs and further restrict financial advisers in servicing consumers.
“The FPA calls on the Government to acknowledge and support Richard St John’s recommendation to improve the dispute resolution system for financial service consumers,” Rantall said.
He said one of the major limitations of the current external dispute resolution model was its inability to adequately distribute responsibility for misconduct amongst responsible product issuers, advisers and other licensees.
“This can significantly restrict consumers’ access to full compensation for loss, as it often results in the parties responsible for the cause of the loss not being held to account or required to pay compensation,” he said.
The Victims of Financial Fraud recently denounced the Government’s move to reject the PJC’s recommendation to compensate Astarra Strategic Fund investors for their $176 million loss.
