Just days out from the final report of the Royal Commission, Industry Super Australia (ISA) has told a key parliamentary committee that it should not be assumed that financial advisers can be trusted to give superannuation fund members advice on selecting post retirement products.
In a submission to the Senate Economics Legislation Committee, ISA pointed to both the Royal Commission interim report and the recent findings of the Productivity Commission to argue that it should not be assumed that retirees will be able to rely on financial advice in making their post-retirement product selections.
It stated: “In short, the current financial advice regime cannot be relied upon to protect consumers”.
“It might be argued that retirees will be able to make effective choices between different pooled products after 1 July 2019 by utilising financial advice,” the ISA submission said but then pointed to the Productivity Commission’s recent final inquiry report which it said “provides support for the view that the current regulatory framework for financial advice cannot be relied upon to connect retirees to the best income products”.
“It observes that: ‘Despite the Future of Financial Advice reforms, conflicted financial advice remains an egregious problem (especially within vertically integrated organisations)’,” the submission said.
The ISA submission said the interim findings of the Royal Commission had also “highlighted a number of recurring problems with advice provided by advisors employed or franchised by for-profit product providers”.
“In particular the Royal Commission found that the routine provision of advice that was in the best interests of the advisor and product provider – rather than the client,” it said. “FOFA has proven ineffectual partly because it does not actually require advisers to act on the best interests of their clients, permitting advisers to recommend in-house products when other products may be more appropriate.”