The Parliamentary Joint Committee inquiry into the financial services industry has led to calls for increased disclosure of conflicts of interest and advice restrictions faced by advisers — in particular those working under licenses held by product providers.
The committee has recommended the Corporations Act be amended to require advisers to “disclose prominently in marketing material” any restrictions on the advice they are able to provide, for example, a limited approved product list, as well as any potential conflicts of interest.
The committee said this was “particularly important in the case of advice from vertically integrated financial institutions”. The committee said in these cases, conflicts of interest attributable to ownership structures “will exist even if commission payments to advisers are eliminated as a form of remuneration”.
While the committee acknowledged the “somewhat limited” extent to which disclosure can protect consumers from poor advice, they said it remains an important tool in assisting consumers to recognise conflicts of interest and understand the cost of advice.
The committee noted the efforts of the Financial Services Working Group to reduce the length and complexity of disclosure material.
“The committee understands the high cost of compliance and is of the view that, along with other measures recommended in this report, the government should direct the Financial Services Working Group to develop mechanisms to reduce compliance costs over time.”
