Planners still struggling with ethics

Some Australian financial advisers are still struggling to come to terms with their ethical obligations, according to new research undertaken at Victoria University.

The research, undertaken by Dr June Smith as part of her PhD thesis, points to the number of consumer complaints around perceived unethical conduct on the part of advisers associated with misleading statements about the performance, features and risks of recommending financial products and the business reputations of those associated with the products.

According to Smith’s analysis, the research findings raise questions about the “commoditised approach” to financial advice used by some financial advisers and “the ongoing failure to accurately match financial products to the needs, circumstances and objectives of clients”.

She said the data suggested that financial advisers “still struggle with even basic legal concepts such as having a ‘reasonable basis’ for advice and ensuring ‘suitability’ of the advice to the client”.

The analysis said that this was usually compounded by a failure to appropriately apply tolerance to risk assessments.

Looking at the complaints analysis, Smith said it highlighted a pattern of overreliance on template Statements of Advice not tailored to a client’s specific circumstances.

“The widespread use of substantial templating of advice poses ethical risks of its own and can at times lead to greater risk to consumers,” she said. “It also hinders the adviser’s ability to fully disclose all matters relevant to an informed decision-making process.”

The research analysis went on to suggest that individual competency levels amongst financial advisers were currently too low to allow them to resolve the complex ethical dilemmas they face in their daily practice.