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The growing trend of outsourcing technical requirements and paraplanning to external companies may be compromising the accuracy of financial advice, according to a submission by former Financial Planning Association director Nick Bruining.
The quality of the data collection will determine the accuracy of advice given, he said.
“What becomes relevant information to be used in developing [a] plan is partially dictated by the data collection process, but prioritisation will be influenced by the data collector’s own level of expertise,” the submission stated.
Bruining fingered planning firms that are too focused on funds under management (FUM) for causing the problem, claiming they outsourced their technical knowledge so their advisers generating FUM inflows weren’t caught out by technical problems.
Bruining also said the education level of financial planners was too low, and a tertiary qualification in commerce or a similar degree should be a minimum standard for providing financial advice.
“It is unlikely that a person completing a two or three week full-time course would have the depth of knowledge … to provide even basic useful advice on the products they distribute,” Bruining said.
