Concerns about commissions justified: Bowen

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, said any future regulatory change would be guided by the need to provide high quality financial advice to as many Australians as possible without distortions to remuneration.

“From my perspective, any regulatory changes to the industry will be guided by two overriding principles. Firstly, the financial advice that people get must be in their best interests — distortions to remuneration, which misalign the best interests of the client and the adviser, should be minimised,” he told delegates at the Financial Planning Association national conference in Melbourne.

Bowen added that, “in minimising these distortions”, it was necessary to ensure financial advice was not beyond the reach of those who would benefit from it.

Bowen later pointed to “real, potential or perceived conflicts of interest” created by planner commissions, which can lead to inferior financial advice.

“Regardless of whether commissions create genuine conflicts of interest — which they can do — they invariably create an overwhelming perception of conflict, a perception that financial advice may be self-serving or not in the best interests of the client.”

Bowen later added that such a perception “justifiably” creates doubt for many consumers, “ultimately to the detriment of the industry”.

“This perception of conflicts of interest isn’t helped by the fact that high-profile firms — such as Westpoint, Timbercorp and Great Southern, which collapsed leaving some ‘mum and dad’ investors with significant losses — all paid commissions to financial advisers,” Bowen said.

The minister said moving forward, “a fundamental goal” for the industry should be restoring trust in the financial planning profession.