he Australian Consumers’ Association (ACA) has reignited the debate over soft dollar payments for advisers, claiming the Financial Planning Association’s (FPA) new code of conduct is failing to protect investors.
The ACA said last week the new code, which came into effect on January 1, was not being implemented in the right spirit by financial planning groups, leaving investors ignorant of the soft dollar payments received by advisers.
Under the joint FPA and Investment and Financial Services Association (IFSA) code, advisers must make publicly available a register of all entertainment, sponsorship or marketing support either given or received by them, provided it is worth more than $300.
ACA financial services policy officer Catherine Wolthuizen said there had been an expectation that planning groups would make the register readily available, including on a web site.
But financial planning groups contacted by Money Management confirmed that many are only providing a hard copy of the register to potential clients who request to see it — a move in line with the FPA’s guidelines.
“[IFSA and the FPA] had been talking about a hosted web site linked from their own sites, similar to the Federal Parliamentary interests register which is regularly updated and available for anyone to look at any time. What we’ve ended up with falls well short of what’s required for consumers to fairly compare advisers and what might be influencing them,” Wolthuizen said.
“If soft dollar payments aren’t clearly disclosed in a public way, it defeats the purpose of recording them in the first place.”
Wolthuizen said most ordinary people would never know about the register because advisers were under no obligation to provide a copy or inform clients of its existence. Rather, mention of the register only has to be made in the fine print of Statements of Advice, Product Disclosure Statements and other documents issued by IFSA and FPA members.
“The consumers who we most want to get this information for are the same ones who will never know to ask for it or look for it,” Wolthuizen said.
FPA professional standards manager Paul Shevtzoff confirmed there was no obligation under the code for consumers to be verbally informed that a register of planners’ alternative remuneration was now available.
“There would be an expectation as good practice [that they tell clients about the register],” Shevtzoff said, adding the code was still in “transition phase” and refinements could be made by an FPA/IFSA oversight committee.
The implementation of the code is being monitored in the field by the FPA’s compliance team, which will report to the oversight committee, Shevtzoff said.
An independent chair for that committee, which will meet quarterly, was still being finalised last week. FPA chief executive Kerrie Kelly and IFSA chief executive Richard Gilbert will also sit on the committee.
