Aussies deserve better quality financial advice

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Australian investors are closer to getting the kind of high-quality financial advice they deserve.

The issue of dodgy sales practices was brought to light a year ago by the scandal involving financial planners at Commonwealth Bank Financial Planning, which exposed corruption - and a cover-up - between 2006 and 2010 that cost clients millions of dollars.

As a result a senate investigated what went wrong with the handling of complaints about the CBA by the financial services regulator, the Australian Securities and Investments Commission (ASIC).

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At the same time the Labor government was drawing up its Future of Financial Advice (FOFA) legislation designed to protect investors from poor sales practices.

But when the coalition came to power, it announced it would water down the FOFA changes.

It all came to a head when the senate banking inquiry recommended a royal commission into what went on at CBA and ASIC.

The Minister for Finance, Mathias Cormann, quashed the idea and the CBA's chief executive, Ian Narev, made an overdue statement about the bank's compensation program.

The CBA announced it would conduct a review, headed by former High Court judge Ian Callinan, and all CBA customers who believed they had been victims of bad advice or misconduct could apply for compensation.

Poor financial advice was also one of the key points in a 460-page report into Australia's financial system handed down by David Murray.

On the same day, the amended FOFA changes were passed when new senator Clive Palmer did a deal with the government.

Murray criticised the quality of financial advice in Australia and called for improved standards of competence.

"There are significant issues with the quality of financial advice, due in part to varying standards of adviser competence and the impact of conflicted remuneration structures," he said.

Murray suggested renaming the term "general advice", which does not take into account personal circumstances, as "sales" or "product information".

He also recommended:

  • A register of financial advisers which includes a record of each adviser's credentials and current status in the industry, managed either by government or industry.
  • Higher minimum education and competency standards for personal advice.
  • A national examination for financial advisers providing personal advice. - Greater powers for ASIC to ban people from managing a financial services business.

His other findings included:

  • Australian superannuation fees are high by international standards.
  • The retirement phase of superannuation is under-developed and does not meet the needs of many retirees to manage longevity risk.
  • Credit card intercharge fees are high.

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