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Murray criticises planner compensation

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By Tim Stewart
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3 minute read

There is no current 'best practice' model in Australia when it comes to financial planner compensation and incentive alignment, argues FSI chair David Murray.

Speaking at a Centre for International Finance and Regulation workshop about the FSI interim report workshop last week, Mr Murray said consumer outcomes have been a “significant focus” for his team.

One of the recurring themes throughout submissions to the FSI has been that the sale and provision of simple financial products is “excessively complex”, he said.

“We believe that the combination of disclosure and financial literacy, whilst important, are not sufficient in our system,” said Mr Murray.

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In this sense, the FSI has gone a step further than the 1996 Wallis Inquiry, which focused on disclosure as the cure-all for consumer safety.

“There are some very simple products that are bought and sold in the system every day that are not the subject of heavy regulation, advice or anything else,” he said.

“This is a very important issue for us. It means that we are trying to figure out where to place financial services in a spectrum of products and services in the economy,” said Mr Murray.

For example, Australia takes the regulation of air safety and pharmaceuticals very seriously, he said.

“It would be simplistic to say people don’t die from their financial services if they’re badly designed, but what’s been very clear to us, particularly in the public forums we’ve held, is the degree of suffering of people who do lose substantial [sums of money],” said Mr Murray.

From that perspective, the FSI team is attempting to draft a system in which the corporate regulator does not have to “second guess” every product in the market that “doesn’t work”, he said.

“It might be important in air safety, but it would not seem to be necessary for financial services,” said Mr Murray.

“But there seems to be a need to have a system in which there is a much higher incentive on product providers and distributors in the system to build trust with their own customers.

“That’s why we’re looking at the regulatory arrangements, the enforcement arrangements and the penalty arrangements much more closely – and we’ve looked at how these things work outside Australia,” Mr Murray said.

Murray criticises planner compensation

There is no current 'best practice' model in Australia when it comes to financial planner compensation and incentive alignment, argues FSI chair David Murray.

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