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Count chairman Barry Lambert has pointed the finger at Australia’s financial services licensing system as the biggest impediment to a safe environment for investors.
“The biggest problem in our industry, in my view, is our licensing system,” Lambert said this morning at Money Management’s State of the Industry breakfast in Sydney.
Likening the financial services industry situation to a prevention versus cure scenario, Lambert said the industry is “lacking on prevention” and while the industry is “building more ‘hospitals’” for the wounded, these are only “imaginary”.
“We call it [professional indemnity] insurance. How will PI insurance protect Storm Financial clients?” Lambert asked.
Lambert said, for example, that failed financial planning group Storm Financial “shouldn’t have had a licence”, adding that “the licensing system is the problem”.
And Storm was not alone in its ideas according to Lambert, who said he was approached by another financial planning group describing a similar model to Storm’s, which recommended clients use aggressive margin loans secured against their home to increase investment returns.
Lambert said he wrote to this group and warned that what they were doing was like going to the races, getting a win on the first and maybe the second, “but at the end of the day the client will lose everything”.
Lambert also pointed to failed group Westpoint as an example of the failures of the Australian licensing system, saying the licensing system “should have checked on those operators”.
Lambert said it’s possible the representatives of the regulator “wouldn’t even send their mother in law to some of the people they’re giving licences to”.
Instead, certain people “run riot and we lock them up years later”.
“It’s not good enough,” Lambert said.
