Advisers need to rethink succession planning

A ‘buyer of last resort’ policy is not an appropriate succession plan for financial advisers because of the financial incentive to advisers based on the level of business held through a particular product provider, according to a submission by Guardian Financial Planning to the Joint Parliamentary Inquiry into financial products and services.

The submission stated that Australian Financial Services Licensees (AFSLs) need to work out an appropriate managed succession plan for advisers who want to retire from the business, but has said the buyer of last resort policy is biased.

The submission also pointed to a lack of prudential legislation and the absence of ongoing reviews of AFSL policies and processes, as well as a “one-size-fits-all” approach to financial advice as contributing to the recent failures of advice firms and damaging the industry’s reputation.

This reputation can only recover if all aspects of the industry work toward a “plain-English approach” that the consumer can understand, the submission stated.

The submission added that there was an urgent need to upgrade accreditation of financial planners and make it clear to clients exactly what advisers were authorised to give advice about. Too many sales people were using the title of financial planner without proper accreditation or experience, it said.

Concerns were also expressed in the submission that the higher claim limits recently put in place by the financial ombudsman service would lead to increased claims, at no cost to the consumer, “simply because they can, with the hope … that something will come out of it”.