Bruce Baker of Queensland-based Puzzle Financial Advice says there is a major problem with compliance of Financial Services Reform (FSR) legislation, relating to disclosure of factors that might influence advice.
"Many of the factors that might influence advice are not being disclosed in a clear, concise and effective fashion," Baker says in a draft paper seen by InvestorDaily.
"This seems to be a clear breach of FSR law, but this critical aspect of FSR Law is not being enforced."
Baker says FSR made a major step forward in requiring clear disclosure of factors which might influence a licensee, such as commissions and alternative remuneration.
"However, many product providers and AFS [Australian Financial Services] licensees have turned this requirement into a farce," he said.
"Product providers of course, have a vested interest in seeking to influence advice, so as to maximise distribution of their product.
"Many AFS licensees have a vested interest in influencing adviceto ensure [representatives] recommend the products of a related entity [or] to recommend a platform that maximises the profit to the AFS licensee."
Baker proposes four solutions, including the development of a brief list of factors that might influence financial advice that would be answered by every dealer group and authorised representative and be on the front page of a financial services guide.
He also proposes the clear differentiation between product sales people and financial advisers.
"It's time we took a microscope to the industry to see if we are living up to high ethical standards," he said.
It is understood that the paper will be circulated widely within the next two weeks under the BFPPG banner.
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