New standards watchdog to oversee the financial sector

Government to introduce new body to oversee the financial advisory sector.

New standards watchdog to oversee the financial sector

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

Opinion: It’s about time too

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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    COMMENTS

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    Oars
    18th Oct 2016
    10:48am
    While they start to scrutinize the rogues of the Finance Sector, have a closer look at the swindling ratbags in the Legal Sector, who are doing basic secretarial work and charge it as legal involvement. Who can catch them at this scam. Maybe we can ask Tom Cruse ( remember his movie) to step in. The only profession that has it's own set of rules that allow their scams to be "so-called legal".
    bohanka
    18th Oct 2016
    11:28am
    The finance sector is like shark infested waters. Who wants to take the risk? It's going to be many, many years before complete trust has been restored and by then it will be too late for many of us to go for a swim.
    MICK
    18th Oct 2016
    8:23pm
    Yeah. The suggested action sounds good but I might suggest that it is like putting Dracula in charge of the Blood Bin. I am yet to be convinced that this is not yet another business con to placate the public and that after a year or two it will be business as usual.
    I do not believe this issue is other than still in play.
    Tom Tank
    18th Oct 2016
    11:42am
    Sorry but this move smacks of papering over some almighty big cracks. The only way to restore confidence is to shine a light on the industry as a whole and that would probably take a Royal Commission.
    Once the truth is out there then proper steps could be taken to make sure that the rip=offs can't happen again.
    We have a government very quick of the mark with Royal Commissions trying to expose the oppositions flaws but very very slow in tackling the big end of town. Shouldn't be surprised at that I guess as it is just running true to form.
    MICK
    18th Oct 2016
    8:24pm
    I am thinking you are spot on Tom.
    Rae
    18th Oct 2016
    11:45am
    How are any of those new measures going to stop advisors charging for services not given, placing clients in fraudulent investments or any other of the swindles dreamed up?

    The only thing I can see happening is more expensive bank fees and charges to pay for it all.

    You would have to be mad to invest or insure with any of these entities in my opinion.
    MICK
    18th Oct 2016
    8:26pm
    Where there's a will there's always a way Rae and the lure of huge amounts of money will create a lay down misere. Only the feeble minded will believe that Turnbull and his cronies are intending to fix this issue when the culprits donate to the Liberal Party.
    Ozetwo
    18th Oct 2016
    12:04pm
    The success of this latest effort to avoid a Royal Commission is whether the "watchdog"is given any teeth. It needs to be able to prosecute fine and possibly jail offenders (right to the top of the tree). There also needs to be money paid back quickly to people who have lost out from shonky practices.
    MICK
    18th Oct 2016
    8:27pm
    Perhaps more correctly will the watchdog give a damn other than when the media and the public are calling for blood.
    4b2
    18th Oct 2016
    12:40pm
    This may be a great first step, however my past experience of the Lib's leave a lot to be desired. The are usually trick and deceptive with their words. They are currently advocating a change to the oversight of trade unions in the Building Industry, why not copy and modify that legislation for oversight of the entire financial industry?
    I am sure Andrew Leigh could advise her.
    MICK
    18th Oct 2016
    8:28pm
    Spot on.
    Old Man
    18th Oct 2016
    12:41pm
    Really, there is no release of who will make up the governing body yet we are asked to give an opinion as to how it will perform. Can I respectfully suggest we wait and see so that a sensible opinion can be formed?

    What is the reason for the disclosure of how many financial advisers belong to a professional body? There are laws in place that must be adhered to by financial advisers and being in a professional body can't change that. Surely this is not a suggestion that a financial adviser who is in a professional body won't break the law and, conversely, a financial adviser not associated with a professional body will break the law.
    KSS
    18th Oct 2016
    12:51pm
    To fully implement these education and standards reforms is going to take 8 years according to the Minister's press release as reported above. Why 8 years?
    BundyGil
    18th Oct 2016
    12:52pm
    I would never take financial advice from any advisor associated with any financial institution.
    There is absolutely no chance your investment would be in your interest, only the interest of the advisor's income would be considered.
    Retired Knowall
    18th Oct 2016
    2:28pm
    The only person that has your financial interest at heart is YOU.
    Get educated yourself, it's reasonably priced.
    MICK
    18th Oct 2016
    8:29pm
    Actually Knowall it normally costs quite a bit. I learned my bitter lesson and am now a lot wiser and a heck of a lot more conservative. Eh Gad.....did I say 'conservative'. God forbid.
    Radish
    18th Oct 2016
    9:45pm
    Absolutely correct Retired Knowall...I woke up to that fact not long after I retired...had money with Commonwealth Bank paid out thousands each year in fees.

    Moved it to a fund where I pay hundreds instead.

    18th Oct 2016
    12:58pm
    My wife and I tried to be diddled by a financial advertiser who represented AMP (not an employee) and we got back every cent (but no interest on outlay) we invested, but she STILL represents them! Whatever you do with whomever you deal with BEWARE.
    MICK
    18th Oct 2016
    8:31pm
    Now I know why my AMP dividends are so crap. It makes me happy that you were not ripped off. I hate crooks.

    18th Oct 2016
    1:07pm
    I worked in the finance industry.

    I now minimise all contact with them.

    Thieves in suits.
    MICK
    18th Oct 2016
    8:32pm
    Add CEOs and their Boards. All a bunch of self interest crooks who fleece the companies they have no shares in other than the free ones they are given. Of course shareholders are fair game.
    FrankC
    18th Oct 2016
    2:00pm
    The AMP is the last company you want to scrutinize the finance sector. I was an agent for them for one year and left because of their ethics towards their agents.
    Retired Knowall
    18th Oct 2016
    2:26pm
    These reform will be of little benefit to the average consumer unless there is an INDEPENDENT AUDIT BODY to systematically and periodically audit the companies offering this service. Penalties need to be substantial when non compliance is found.
    Without that it is just a whitewash.
    Anonymous
    18th Oct 2016
    3:16pm
    Yep
    MICK
    18th Oct 2016
    8:33pm
    No (severe) penalties = continued corruption.
    floss
    18th Oct 2016
    3:51pm
    In my first four years of retirement our financial adviser[ note lower case] made more from our super than I did, till I woke and took control of it.I have not have a loss since, all the best Gang you will need it if this mob stay in power.
    MICK
    18th Oct 2016
    8:34pm
    Good you woke up. This industry is fraudulent with a few good ones mixed in.
    Migrant
    18th Oct 2016
    4:53pm
    What's wrong with funding APRA ASIC and all the other Financial services Ombudsmen, and superannuation complaints tribunals, and telling them to get on with the supervisory work.
    Self regulation rarely works in any industry, guild or trade union.
    Migrant
    MICK
    18th Oct 2016
    8:37pm
    I've been to these unaccountable public service bodies. For the most part THEY REFUSE TO ACT when criminal activity is brought before them. All you get is a reply stating that they cannot do anything and then giving you another body to contact. In the end this proves useless and you have to either go the the media to expose the crooks or go away. You lose.
    I do not want to see more good taxpayer money going to public servants who do little other than justify their huge cost with one or two sabre rattling cases once a year.
    bob
    18th Oct 2016
    5:26pm
    Wow-ASIC in charge!What will they do ?Write another report on how people are being ripped off?I notice that no one is penalised over past misdemeanours and no one will while the buddies are watching over their friends.A royal commission is what the people want.
    MICK
    18th Oct 2016
    8:40pm
    THat's about it bob. Been there with most of these money wasting organisations and can attest to how useless and negligent they are.
    If they were forced to have accountability (a word government and the public service refuse to admit into the dictionary) then the organisations would work. Publishing individual employee results would be a wonderful way to start. Then watch then start to work. But don't hold your breath.
    Strummer
    19th Oct 2016
    9:44am
    Unfortunately, I don't have a lot of faith in Kelly O'Dwyer.
    PlanB
    22nd Oct 2016
    10:46am
    Kelly O'Dwyer is certainly not to be trusted and she is a real nasty piece of work too
    shirboy
    19th Oct 2016
    4:21pm
    I know of a TRUSTED chartered accountant who diddled his clients out of hundreds of thousands & then decided to take his own life.
    ex PS
    19th Oct 2016
    8:03pm
    Now they better look out, Malcolm is ready to whip them with a damp feather if they get out of line again. Why do I not feel any safer?
    PlanB
    22nd Oct 2016
    10:50am
    I do not trust financial advisers -- I used to work with one -- well in the same company and they sure look after their own pockets and get a good wage -- by percentage --out of the investments they get people into, no way I would allow them to invest for me.
    PlanB
    7th Nov 2016
    6:50am
    Having seen and listened to Kelly O'Dywer -- she is the most smart A*&^% piece of work and avoids so many questions with smart A*&^% answers I would not believe a word she uttered


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