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The collective damage to the reputation of advisers in recent years highlights the need for the advice industry to be more vigilant in exposing bad practices, according to Association of Financial Advisers (AFA) chief Richard Klipin.
Klipin used his opening address at an AFA lunch in Sydney this week to discuss the broad damage to the reputation of the advice industry as a result of the actions of groups such as Storm Financial.
“What happened in Townsville and Cairns, the damage that Storm brought, implicated all of us,” Klipin said.
Speaking later to Money Management, Klipin said the industry had to work harder to expose advice practices that may inflict further damage to the reputation of the industry.
“We need to be vigilant and wary, because in a sense we all share responsibility for the reputation of the advice profession,” Klipin said.
As he said at the AFA lunch, the industry must “expose people who don’t make the mark”.
“There’s responsibility at a licensee level and there’s responsibility more broadly at an industry level.”
The headline speaker at the lunch was the Minister for Financial Services, Chris Bowen. Bowen agreed the events surrounding Storm Financial had “hurt people and dented confidence”, while also acknowledging the “vast majority” of advisers had not “done anything to deserve the absence of trust and confidence”.
There have been a few attempts to eradicate the so-called ‘bad apples’ from the financial advice sector. The Australian Securities and Investments Commission (ASIC) launched a program under that name in 2004 that aimed to improve reference-checking practices to ensure rogue advisers do not move freely throughout the industry. But some argue that process is not working.
The Financial Planning Association (FPA) recently introduced a confidential complaints service in partnership with Deloitte, in addition to making public its quarterly disciplinary report public. But there remains much industry intelligence that doesn’t make it into the right hands in time to prevent consumer losses.
The regulator has been criticised in recent years for only arriving on the scene after an accident has occurred. ASIC’s powers may be increased as part of the Future of Financial Advice Reforms to allow the regulator broader scope in determining whether to issue, cancel or suspend an Australian Financial Services Licence. If the reforms are successful, the regulator will also be able to take into account a wider range of matters when it comes to banning individuals.
As part of the reforms Bowen proposed a panel be established to review professional standards in the advice industry, including conduct and competency standards. That panel may include members from the industry, professional associations, academia, consumer representatives and ASIC officers.
Klipin said through that forum it may be possible to tap into “formal and informal intelligence around the market so that we can get a better fix on this stuff and hopefully take some quicker action to avert any of those issues”.
In the meantime Klipin urged advisers who are concerned about industry practices to “talk to their licensee, talk to their association and obviously talk to the regulator”.
“If people know that bad stuff is going on, let’s not wait until it ends up in court or on the front pages of the newspapers before we collectively turn our attention to it.”
