Financial services slammed for conflicts of interest
SETTING new competency standards for financial advisors will not be enough to "dismantle the industry's product-selling culture", without ethical reform, a senior member of the Federal Government's financial literacy board has told a Senate inquiry.
Air Commodore Robert Brown, who also chairs the Australian Defence Force's Financial Services Consumer Council, on Tuesday hit out at a lack of political courage to address conflicts of interest in the industry.
In a submission to a Senate inquiry examining the professional standards of the financial services industry, Air Comm Brown wrote that change was needed to conflicted remuneration rules.
"Lifting education standards of licensed advisors will make some difference, but it is not the answer to the industry's unethical practices which are principally caused by conflicted remuneration," he wrote.
"Unless this is accompanied by comprehensive ethical reform…all that higher technical education will do is to create an industry of highly qualified product sellers.
"As a result, parliaments of the future will be with the same problem that generations of politicians have failed to address; and the lack of trust and public confidence in financial advisors will continue."
Air Comm Brown wrote that while self-regulation was preferred, more needed to be done to prevent brokers and advisors from using "fee for service" clauses in contracts with clients, which he wrote leads to "conflicts masked as an un-conflicted professional fee".
The Senate inquiry comes as the government continues to move towards rolling back parts of Labor's future of financial advice reforms, which have been widely criticised as jeopardising consumer protections.