FPA says appoint planners to FOS panels
The decisions of external dispute resolution (EDR) schemes such as the Financial Ombudsman Service (FOS) would be enhanced if an experienced financial planner was included in disputes about advice, according to the Financial Planning Association (FPA).
The FPA's submission to the Government's Review of the financial system EDR framework said there was an argument that, in some cases, EDR schemes had insufficient expertise to make a proper assessment.
"For example, unless the panel deciding a case has direct experience in providing advice, it is difficult for them to assess the appropriateness of advice," it said.
FPA chief executive, Dante De Gori later clarified that the his organisation supported the number of planners being utilised by FOS and that the submission's reference was in respect of EDR schemes more generally.
Noting that while the admission of expert evidence went some way toward managing this problem, a better way would be to ensure an experienced financial planner was included on the panel for disputes about advice.
"For disputes involving financial planners, the individual planner is not a party to the dispute unless they are also a financial services provider. This exposes individual financial planners to risks (including reputation risk) from dispute resolution, that are outside their direct influence," the submission said.
It said that, in turn, financial planners were incentivised to spend more time testing clients' stated intentions than would otherwise be optimal.
The submission said that better outcomes for consumers and financial service providers were likely if there were no such distortions.
"For these reasons, it may be desirable for financial service providers and financial planners to co-operate. This could be achieved by, for example, appointing financial planners as representatives on the boards of EDR schemes and allowing financial planners a right to be heard where a dispute relates to their conduct," it said.
The FPA submission suggested that EDR schemes could also report professional malpractice to the relevant professional association and could work co-operatively with professional associations in developing guidance on best practice.
"For example, we believe that disputes involving individual financial planners should be referred to the relevant professional association wherever material/significant professional misconduct is identified. Disputes could be handled contemporaneously with FOS and CIO. This arrangement benefits consumers (and financial planners and, in turn, many members of EDR schemes) by improving consumer confidence that the higher standards demanded by professional associations will be honoured."
Recommended for you
AMP has agreed in principle to settle an advice and insurance class action that commenced in 2020 related to historic commission payment activity.
Financial advisers will have to pay around $10.4 million of the impending $47.3 million CSLR special levy but Treasury has expanded the remit to also include super fund trustees and other retail-facing sub-sectors.
While social media can have positive financial influence, the overwhelming risks signal a greater need for affordable advice as Australians continue to seek financial education on social media.
Fitzpatricks Advice Partners has released a guide on building a national advice firm with the argument that these firms are crucial to facilitating growth in the struggling profession.
