A change to the Corporations Act to recognise the fiduciary duty by financial planners to put the interests of their clients first was part of a raft of recommendations announced last night by the Parliamentary Joint Committee (PJC) on Corporations and Financial Services Inquiry into Financial Products and Services in Australia.
The PJC also recommended the government consult with Australia's financial services industry on the best way to ban commission payments and volume bonuses from product providers to advisers.
"The conflicts of interest created by these payments are not always managed properly and should be removed to improve trust and confidence in the industry," PJC chair Bernie Ripoll said.
Key recommendations included:
- Making the cost of financial advice tax deductable for consumers.
- ASIC work together with the industry to form a professional standards board that advisers would be required to join. The body would establish, monitor and oversee competency and conduct standards.
- ASIC be resourced to perform risk-based surveillance of the advice provided under an Australian financial services licence.
- Extend ASIC powers to remove individuals and licensees from providing financial services.
- The government investigate options for a last resort compensation scheme.
Industry bodies have supported the committee's recommendations.
"They have nabbed the issue at the source by raising the standards of care to a fiduciary duty. This prevents advisers from taking commissions," Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos said.
"Making advice tax deductable has been something that ASFA has been pushing for a long time. This recommendation recognises the value of advice and that giving advice is separate from selling product," Vamos said.
FPA chief executive Jo-Anne Bloch said the recommendations will improve professional standards in the industry.
"Recognising that duty of care is a fiduciary duty enshrined in law will lift the conduct and standards of the industry. Giving ASIC risk-based surveillance powers is proactive regulation," Bloch said.
The nine month inquiry included about 400 submissions from investors, financial advisers, dealer groups and representative bodies.
The inquiry was established following the collapse of Storm Financial and Opes Prime.
"Beyond the events surrounding Storm, consistent evidence to the committee supported the view that the required quality of advice Australians receive from their financial adviser needs to improve," Ripoll said.
