Thefinancial planning industry is bracing itself for another attack on its credibility ahead of the release of a damning report expected to call for government intervention to correct major industry weaknesses.
The report, to be officially released in February, is the result of a joint year long investigation into the financial planning industry by the Australian Consumers Association (ACA) and theAustralian Securities and Investment Commission(ASIC).
The investigation involved 180 consumers secretly approaching financial advisers to obtain financial plans, which were then tested by a panel of industry experts and ranked as either very good, good, okay, not okay, poor or very poor.
The ACA said last week it would not comment on the report until its release.
However, sources who have seen the report say it claims to expose substantial weaknesses in the financial planning industry.
These weaknesses include the incentive for planners to churn clients to gain extra commissions and the prevalence of inadequate advice in the market — although it is believed some 60 per cent of plans tested were ranked okay or better.
The report is also understood to highlight the difficulties that lower income individuals have in accessing financial advice, with many consumers involved in the study unable to find a financial planner to take them on.
Sources say the report calls for major government intervention to address these weaknesses.
The call is in line with statements made by ACA chief executive Louise Sylvan before Christmas, who said the financial planning industry needed to be reformed because it was “characterised by structural corruption”.
TheFinancial Planning Association(FPA), which has seen the report and was involved in the assessment of the financial plans in its findings, was unable to comment on the issue last week.
ASIC was also unable to comment on the report when contacted byMoneyManagementlast week.
The report will be the latest in a long line of recent attacks on the credibility of advisers.
Last month, theAustralian Prudential Regulation Authority’s (APRA) executive general manager Charles Littrell was quoted as saying the retail investment industry was “based on bribery” when referring to commission based financial planners.
The peak accounting industry body,CPA Australia, has also recently claimed independent financial advice for consumers is diminishing.
