Investors continue to have a love-hate relationship with the financial services sector, and confidence in the advice community isn’t much better than during the litany of scandals that plagued the sector.
Formal complaints lodged with the Financial Planning Association (FPA) and the industry regulator, ASIC, have also been up in recent years.
There’s clearly a lot more to rigorously pressure-testing financial advisers than their ability to operate within a stricter compliance regime.
Not even ASIC could prevent dodgy financial planners, sacked for providing dishonest advice during scandals, from resurfacing elsewhere.
As a case in point, Commonwealth Bank planner Stuart Jamieson was caught forging customers’ signatures and subsequently expelled by the FPA.
However, the decision by the bank to let him resign – rather than be fired – meant he was able to go on to two further jobs in the finance sector without clients knowing anything about his past.
At face value, it’s difficult to distinguish between the “honest and good”, “honest yet fundamentally incompetent” or “downright rogue” financial advisers.
However, Christoph Schnelle, of In Your Interest Financial Planning, says alarm bells should ring if you experience any of the following behavioural traits during an initial meeting with a financial adviser:
- You were polite and they became defensive at innocent remarks.
- They can’t explain products and investments simply.
- They can’t connect on a human level.
- You feel you’re being sold products from day one.
- They’re technically proficient but lack empathy.
- Their relationship with product providers isn’t disclosed.
- They become overly friendly and paternalistic.
- What they’re proposing seems too good to be true.
- They use scare tactics.
- They become overly emotional, judgmental and idealistic.
Legislation setting out a new professional standards and education framework for planners has been passed by parliament.
This means that from January 1, 2019, new advisers must pass an exam, be degree-qualified and be supervised during their “professional year” (at least 12 months of working and training) by a registered financial adviser.
There are also new requirements for existing advisers. They must:
• Comply with a code of ethics (to be set by a future professional standards body) from January 1, 2020. This could be facilitated through membership of a professional association.
• Pass an exam by January 1, 2021.
• Attain degree equivalency by January 1, 2024.
• Undertake ongoing professional development.
As well, the Life Insurance Remuneration Arrangements Bill 2016 has passed through the senate, creating a more level playing field for advisers, with no carve-outs for direct sales of life insurance.