Advice held back by poor approach to legislation and compliance
Financial planning advice in Australia is hamstrung by low standards and regulation which focuses on selling which stems from a perspective that the sector is corrupt.
At the same time financial planning in Australia has only moved far enough to comply with the letter of the law and has yet to offer client focused and specific advice across the board according to FinaMetrica co-founder and director Paul Resnik.
Resnik said the Australian financial planning advice sector has developed within a bubble of its own removed from global trends that are shifting away from institutional advice due to successive legislation that has focused on product selling and not client specific advice.
"In Australia there is a base of old legislation that has informed later legislation and there has been a focus on product selling which has allowed the use of products driven by planners or fund managers or banks," he said.
"In fact the Future of Financial Advice (FOFA) legislation is a perspective on corruption that believes there is something wrong with remuneration when it is upfront but does not address when it is oblique such as in a vertically integrated model."
"The end result is that no-one trusts anyone, which gives rise to things like the self-managed superannuation sector, who don't trust banks or fund managers but will still become equity holders of those organisations."
Resnik said the bubble effect was apparent when comparing the Australian sector with that in the UK and the USA and that all three markets saw major finance institutions backed by tax payer money to survive the global financial crisis.
He said in the UK this resulted in legislation that caused the end of bank involvement in advice and the development of a client centric legislation while in the US planning groups have begun to move away from institutions because it provided a competitive advantage to do so.
"The result of the same event in Australia — banks saved by the tax payer — resulted in the banks buying anything that moves."
"At the same time most large organisation have a compliance department designed to ensure they keep their licence and fit with the regulations they are worried about and are constrained by bad legislation to act this way."
"The only way for financial advice to get past this is for individuals to state they can do better outside the institutional system and find practice and businesses who go beyond the legislation and regulation."
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