Not enough ‘buyer beware’ in financial services

The corporate regulator could reduce some of the red tape it has placed around the advice industry if it put responsibility back on the consumers, according to an adviser.

VISIS Private Wealth partner, Chris Smith, said ‘buyer beware’ as a principle did not get enough attention in financial services.

“People do deserve protection to some level, but a lot of people during the Global Financial Crisis, the Royal Commission, or anytime something went wrong could make a complaint against an adviser that could go to the Australian Financial Complaints Authority [AFCA],” Smith said.

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“The adviser really doesn't have much of a standing and the consumers are well and truly in the box seat when it comes to an AFCA complaint.”

Smith said if there was a buyer beware responsibility on the consumer and they did not have those mechanisms as easily available, advisers would not be as disadvantaged in the process.

“I believe that consumers would probably pay a bit more attention to what they are putting their money into, rather than blindly trusting an adviser who happens to be the first person they come across on a Google search, for instance,” Smith said.

Smith noted if there was a distinction between product and strategy advice, advisers would also be more protected in having a complaint made against them.

“There's a lot of product advice out there and if you recommend a commission free product and you thought it was the best insurance product out there and appropriate for clients, the burden that goes with the risk and responsibility of providing that advice is still high,” he said.

However, if there was a distinction between product and strategy advice, Smith said there would be more advisers giving a larger range of advice.

“If they totally decoupled product and took away any sort of product base revenue, then the risk probably comes down and so too should the regulations that go around them,” he said.

According to AFCA, complaints against advisers had been trending down this financial year and were only 1.4% of all of AFCA’s complaints during the 20/21 financial year. 

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