NEWS - Financial Services
Published 9:53 PM, 23 Nov 2009
Last update 0:53 AM, 24 Nov 2009
Ripoll Inquiry urges fiduciary duty for financial advisers
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By a staff reporter
The long-awaited parliamentary committee inquiry on Australia’s financial services industry has called for amendments to the Corporations Act to include a fiduciary duty for financial advisers operating under an Australian Financial Services Licence (AFSL) but stopped short of requesting a complete ban on commissions.
The investigation chaired by Labor MP Bernie Ripoll, which tabled its list of 11 recommendations to the federal parliament tonight, also asked the government to ensure that the Australian Securities and Investment Commission (ASIC) was appropriately equipped to carry out effective surveillance of the advice provided by licensees and their authorised representatives to clients.
The nine-month investigation by the Corporations and Financial Services committee received 407 submissions as it investigated the role of financial planners and the impact of the collapses of Storm Financial and Opes Prime.
The committee said the government needed to work with the financial services industry to put an end to payments from product manufacturers to financial advisers and also recommended measures to ensure that advisers make clearer disclosure on restrictions on the advice they can provide to consumers and any potential conflicts of interest.
Speaking to ABC’s Lateline Business, Mr Ripoll said the committee was keen to see the government work with the industry to find ways to clamp down on remuneration structures that were in conflict with the fiduciary duties of planners rather than seek legislation to ban commissions.
“It’s a broad and bold recommendation that looks at all payments from product manufacturers to advisers,” Mr Ripoll said.
Mr Ripoll said any timetable on reforms was an issue for the federal government and the financial services sector should be involved in the process.
“We haven’t set a timeframe, we think that is an issue for the government, government should be setting timeframes in consultation with the sector,” he said.
“This is a big change and is going to involve people reorganising the way they do business, some products may need to be re-manufactured in a different way,”
Investment & Financial Services Association (IFSA) chief executive John Brogden said the report was a win for consumers and the industry
“The Committee’s recommendation seeking a fiduciary duty for financial advisers is a win for consumers and a win for the professional standing of the advice industry," Mr Brogden said.
“If a fiduciary duty for financial advisers is adopted, we do not believe that ceasing remuneration paid to financial advisers from product manufacturers is required."
The committee's recommendations for allowing consumers to claim payments made for financial advice as a tax deduction and the establishment of an independent, industry-based Professional Standards Board for financial advisers also won Mr Brogden's support.
The Shadow Minister for Financial Services, Superannuation and Corporate Law Chris Pearce also welcomed the recommendations and said they provided a solid framework to improve the sector.
"I support the Committee’s eleven recommendations," Mr Pearce said.
‘Each recommendation offers the Government substantial opportunity to further improve and enhance the regulatory framework introduced under the Coalition.’
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