The Financial Planning Association (FPA) has stepped up the pressure on its members over soft dollar payments, asking them to prove they are complying with a new code of conduct.
The FPA has written to all principal members requesting they submit evidence that shows they are meeting the conditions of the code, which was introduced in January to combat growing unease among consumer groups over soft dollar payments received by financial planners.
The code banned some forms of soft dollar payments to advisers that are linked to volume sales, including free attendance at conferences, and required others to be disclosed on a public register.
From July 1, the existence of the register also had to be divulged to consumers in disclosure documents.
FPA manager of policy and government relations John Anning said financial planning groups would have to demonstrate that they had established a soft dollar register, and that clients were being informed of its existence.
“It has been half a year since the register came into force and we needed to go out to members [and check compliance], especially given that from July 1 they needed to disclose that they had a register available,” Anning said.
The code was already having a significant impact on the more unscrupulous soft dollar payment practices in the financial planning industry, Anning said.
“We have anecdotal evidence the conferences that the soft dollar code was established to eliminate are actually falling away,” Anning said.
While acknowledging that many advisers had initially viewed the code as unnecessary red tape, dealer group heads said most planners had come to terms with the need to comply.
Professional Investment Services chief executive Robbie Bennetts said the compliance burden imposed by the code was manageable.
“Obviously a lot of planers had a lot to say about it at the start, but it hasn’t really created any major dramas for us,” he said.
Financial Wisdom general manager Paul Barrett said: “In the long-term, the code is a good thing because it is focussing advisers on the issues. It is working at a micro level. On the broader issue of removing conflicts, the industry has a long way to go, but we are on the right track.”
The FPA has the power to fine or even expel members who break the code. The association has set up a committee to police the code and issue punishments to transgressors.
“No instances of breaches [since the code came into force] have been considered by the committee,” Anning said.
“A number of issues have been brought up, but they related to arrangements from before the code came in.”
