Criminal charges are yet to flow from the Commonwealth Bank financial planning scandal, despite allegations of fraud and forgery.The government is facing calls to introduce a user-pays system for regulating the financial advice industry to give the corporate regulator a much-needed injection of funds. It comes as the Coalition faces fresh criticism over its push to water down financial advice rules and in the wake of its refusal to hold a royal commission into the Commonwealth Bank of Australia, part of its response to a landmark Senate inquiry.
The inquiry scrutinised the performance of the Australian Securities and Investments Commission following allegations of misconduct and fraud at CBA’s financial planning arm.
The government released its response to the inquiry’s 61 recommendations on Friday, including plans to introduce a national register to help track bad financial advisers.
Industry groups supported the move, which will require all advisers to list their names, status and work histories, qualifications, memberships of professional bodies, any previous sanctions or bans, and details of ownerships of licences.
“We’ll finally get a complete, comprehensive listing of every individual in the country that provides advice,” said Financial Planning Association general manager of policy and conduct Dante De Gori.
“It enables consumers to verify those advisers and check their credentials.”
But Labor and industry super funds criticised the government for introducing the register while, they said, simultaneously dismantling key consumer protections in financial advice laws.
The Coalition is hoping to push through amendments to Labor’s future of financial advice (FOFA) laws before the end of the year, with the support of the Palmer United Party, including diluting a “best interests” duty for advisers.
Opposition treasurer Chris Bowen said the register was “no replacement” for the FOFA laws.
“It’s not objectionable in and of itself, but a simple registry where people can see poor advice after it’s been given is no replacement for laws that stop poor advice being given in the first place,” he said.
He criticised the decision to reject the inquiry’s recommendation for a royal commission.
“The government’s very quick to call royal commissions when it suits them, but here’s a royal commission that would have positive benefits for Australian consumers and they’re just not interested.”
Under the proposed FOFA changes, banks will still be able to pay sales incentives to their staff based on the amount of products, including complex products, sold through general advice – provided the payment is a bonus and is not “solely” related to the sale of a single product or class of product.
This is satisfied by having sales targets placed across several products or which include another measure, such as customer satisfaction.
Industry Super Australia chief executive David Whiteley said the decision to pursue the reforms went against evidence gathered during the Senate inquiry. “Despite the evidence, the banks have lobbied to weaken advice laws, and there is now a bill in front of the Senate to weaken advice laws,” he said.
“Their decision to continue with this is flying in the face of all the available evidence from regulators and from the market itself.”
Mr Whitely said any register of financial advisers should require details of how advisers were paid.
“Is an adviser paid solely on an upfront fee for service? Does an adviser receive sales bonuses?
“This is what the cause of all the scandals has been.”
As part of its response to the inquiry’s 61 recommendations, the government pushed back decisions on a raft of recommendations relating to ASIC’s functions, powers and funding, until the Financial System Inquiry now under way reports later this year.
These included recommendations to replace ASIC’s funding model with a user-pays model, which would impose levies on the various industries that ASIC oversees to fund the regulator’s operations, including financial advisers and liquidators. ASIC has estimated such a move would raise $287million.
Nationals senator John Williams said it was necessary to introduce user-pays licence fees for advisers and liquidators as soon as possible to allow ASIC to better police the industry.
“We’ve cut $120 million out of ASIC’s funding over five years,” he said. “These licences should be brought forward to start on the first of July next year.”
John Brogden, chief executive of the Financial Services Council, which was responsible for lobbying the government on behalf of the banks to water down the FOFA rules, welcomed the decision to introduce a register.
“It is critical that consumers know as much as they can about the adviser they are considering engaging,” he said. Mr Brogden dismissed the need for a royal commission, saying it “won’t tell us anything we don’t already know”.
“The world of financial advice has changed massively over the last couple of years and will continue to improve in years to come,” he said.
The FSC represents more than $2.2 trillion of funds through the major banks, AMP, trustee companies and financial advisory networks.
It stood by calls on Friday to introduce a regulator to oversee education standards in the financial advice industry, a move that blindsided some of FSC’s own members and embarrassed the government, which is keen to show that the industry needs less red tape, not more.
“We disagree with the government on this one,” Mr Brogden said. “We think the need to increase the reputation of financial advice is such that it needs the backing of government through a statutory body to gain trust from the community.”
Finance Minister Mathias Cormann said the government had “done away with unnecessary and costly red tape that has pushed up the cost of financial advice.”
“Any costs imposed on this industry is ultimately funded by people’s retirement savings,” he said. He said the government did not accept the recommendation to establish a royal commission into the Commonwealth Bank.
“There have already been several comprehensive inquiries into these events and related matters.”
In a statement, ASIC said it had already implemented many of the recommendations, and was implementing others.
“ASIC welcomes the government’s response to the Senate economics reference committee’s report into the performance of ASIC,” it said.
This story Administrator ready to work first appeared on Nanjing Night Net.