ISA lobbies for changes to FSR terms of reference

Industry Super Australia (ISA) has lobbied to have the terms of reference for the Government's Financial Systems Review (FSR) amended to deal with conflicts of interests and incentives in the provision of financial advice.

In its submission to Treasury on the terms of reference for the FSR exercise, the ISA has urged that the language of the draft terms of reference be revised "to focus on how consumer preferences can be developed free of conflicts of interest, and the incentives of financial firms and sales personnel can be aligned with the with the best interest of the consumer".

The submission has also recommended that the terms of reference should traverse the fees and costs of financial services on an individual consumer basis and on an aggregate economic basis, while considering "ways in which fees and costs in all respects can be reduced".

It claims that a few items of the draft terms of reference "imply a view of financial services that is very demand driven, particularly that the services provided and the terms and conditions thereof are primarily a response to the interests and demands of consumers and users of financial services more generally".

"We believe a more complete view should reflect how the demands of consumers are created and influenced by the financial services sector itself," the submission said.

"It has long been observed that financial products are ‘sold, not bought.' The purchases of consumers are intricately shaped by sales and advice personnel. For the Inquiry to truly encourage products that are in the interest of consumers, the incentives in the distribution and sales of finance would be a more fruitful area of emphasis than the responsiveness of the industry to apparent demand (after it has been shaped)."