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NEWS - PLANNING
Planners push self-regulation
4/7/2003
Financial planners have changed tack in an attempt to repair their poor image and avert the threat of new laws and heavier intervention by regulators.
The industry's lobby group, the Financial Planning Association, has told its members that planners have to accelerate reforms to salvage their reputations.
"If we do not act, somebody, namely a politician or a regulator, will do it for us," said FPA general manager, professional services and general counsel, June Smith, at a conference last week.
The industry body has questioned the Australian Consumers' Association's description of financial planners as "structurally corrupt", however.
But the ACA defended its finding. "It is a reference to the fact that they are working with fund managers, principals and dealer groups when they represent themselves as independent to the client," said ACA project manager Jackie Pearson.
She said planners experienced an "identity crisis" between acting as independent agents and as agents of fund managers who were dependent on trail commissions.
Ms Pearson said there was also a need to investigate the standard of the investment research used by financial planners that was paid for by fund managers.
"The consumer cannot tell if there is a vested interest in the way information about the product is collected and presented," she said.
The Australian Securities and Investments Commission's executive director, consumer protection, Peter Kell, said the regulator's recent shadow-shopping survey on the quality of financial advice showed the need for reform.
"If we don't grapple with these things now, I think there will be pressure for increased regulation," he said, warning of the potential for the development of a crisis of trust and an increase in litigation.
Mr Kell said that bad markets presented an opportunity to address industry problems.
"We will continue to be active in this area," he said, noting that enforcement was an option.
ASIC has received enforceable undertakings from ING subsidiary RetireInvest, and has added a condition to Lifespan Financial Planning's licence, in the wake of its shadow-shopping survey.
The regulator is planning to release a report on the remuneration and practices of planners who are affiliated to major banks and insurers.
It is also considering enforcing legally binding rules to crack down on the misleading use of past-performance data in investment advertising.
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