Regulations must distinguish between sales and advice

A Queensland financial planner has made a submission to the parliamentary inquiry into banking and financial services in which he suggests Australia look to the UK Financial Services Authority’s (FSA's) retail distribution review from November of last year for guidance.

In his submission, Puzzle Financial Advice director Bruce Baker said, “Remuneration practices and conflicts of interest” in the financial planning industry are complex and “it is unreasonable to expect consumers to appreciate how these can and do taint advice”.

Baker said while the Financial Services Reform Act “attempted to address this issue through disclosure … clearly this has not achieved the desired outcome”.

He pointed the emergence of long Statements of Advice that “the average consumer has no reasonable chance of comprehending”.

While Baker made a number of recommendations to the inquiry, one of his key points is that regulations must ensure that “financially naïve” consumers be able to readily distinguish a “financial product salesperson from an adviser who is acting in the client’s best interest”.

“If Storm Financial was clearly identified as a financial product sales business … fewer consumers [might] have lost money.”

Baker said he agrees with the UK FSA’s view that consumers benefit from a differentiation between “independent investment advice and financial product sales”.