The big banks and AMP will fund a new statutory body that will mandate professional standards for financial advisers, in a move towards restoring faith in the financial advisory industry.
Financial Services Minister Kelly O’Dwyer announced the Federal Government’s plans to introduce a new independent body that will govern professional standards for Australian financial advisers, along with the creation of a uniform, national code of ethics.
The changes will affect around 22,500 financial advisers, as well as professional financial bodies and institutions. The Australian Securities and Investments Commission (ASIC) will also have increased powers over the financial sector.
As reported in The Australian Financial Review, the announcement comes ahead of a disturbing ASIC report disclosing how big banks and AMP have been ripping off millions of dollars from tens of thousands of customers for services they didn't receive.
The Stockbrokers Association of Australia (SAA) has welcomed the announcement from the Federal Government.
“We have consistently supported reforms to raise education, training and ethical standards in the financial advisory industry,” said SAA’s CEO Andrew Green. “These are critical steps to maintaining investor confidence and integrity within the system and they have our 100 per cent support.”
After Labor’s constant hounding of the Government for a royal commission into banks and dodgy financial practices, which was strongly backed by the Australian public, it seems the Government has finally responded to pressure to act accordingly.
Kelly O'Dwyer said the new legislation will be introduced into Parliament this year.
According to the Minister’s press release, the reforms will include:
- compulsory education requirements for both new and existing financial advisers
- supervision requirements for new advisers
- a code of ethics for the industry
- an exam that will represent a common benchmark across the industry
- an ongoing professional development component.
The new professional standards regime will commence on 1 January 2019, with existing advisers having until 1 January 2021 to pass the new exam and 1 January 2024 to attain the full degree status necessary to practice.
Read more at www.treasury.gov.au
The new financial standards body is one that should be welcomed by all Australians and the reforms that will take place can’t come into effect soon enough.
Trust in the financial sector has been eroding for years now. The announcement of new reforms and a governing body overseeing the conduct of our financial advisers may well be a reaction to Opposition and public pressure, but will it be enough to restore faith in the sector?
Kelly O’Dwyer is responsible for choosing the board that will oversee this body, so it goes without saying that the people she selects to manage it will determine its failure or success. If she chooses the same people who have been involved in, or anywhere near, the scandalous conduct of the past, then the reforms are headed for a fall and we return to square one – and renewed calls for a royal commission.
Only half of Australia’s financial advisers actually belong to a professional financial association, and these can run according to their own rules. The new standards body will be responsible for setting a national code of ethics, but the success of how it will be enforced remains to be seen.
Currently, the plan is that associations such as the Financial Planning Association (FPA) and independent bodies subject to ASIC approval will be responsible for policing the new reforms. It may not have as much clout as a royal commission, but at least it’s not self-regulatory and, hopefully, a step in the right direction towards a more trustworthy and transparent industry.
At the very least, the retirement savings of many Australians may, for now, be a little safer, if not soon enough.
What do you think of this news? Do you think these reforms will be more effective than a royal commission? Do you feel that your money will be safer now? How do you think the financial sector should be overseen in the meantime?
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