When regulations fail, the industry must step up

The financial services industry must take a more proactive approach to weeding out bad apples, according to Count Financial managing director Marianne Perkovic.

Perkovic, along with Count chairman Barry Lambert, believes that while the financial services industry is heavily regulated, the regulations have let the industry down. Perkovic believes the current licensing system for Australian financial services providers is the “root of the problem”. The Australian Securities and Investments Commission has issued too many licences to companies that have turned out to have inappropriate practices, Perkovic said.

But while the regulations may have failed consumers and the industry in some instances, Perkovic also believes the industry itself has “failed to weed out the bad seeds”.

Perkovic believes the industry should be more proactive in weeding out companies that pose potential risks to consumers, as well as to the reputation of the industry in general. The failure of groups such as Westpoint and Storm Financial not only cause damage to their clients, but the reputation of the advice industry as a whole.

Perkovic believes it would be beneficial for industry participants to work with the regulator in identifying potential problem companies. While respect should be paid to different business models, Perkovic said a collaborative approach with the regulator could help expose problems.

When problem companies are left unattended, resulting in damages to clients, consumer confidence in the industry is reduced, which then prevents many from receiving the advice they need, Perkovic said. She believes the industry must work together to improve the reputation of the industry and get more people getting advice.

Meanwhile, the current debate surrounding the cost of advice is not taking into account the educational and emotional-support role played by advisers, Perkovic said. Many advisers have been in the front line of explaining the current crisis to clients, this is an important role that often goes unacknowledged.

The price paid for advice must include the time spent by advisers explaining the industry to clients and helping them to define and plan for their needs. This educational role is extremely important in an industry that is notoriously hard to understand, and where the people who need help the most are often the most disengaged.