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ASIC

Advisors call on ASIC to crack down on industry standards, not just fees

John Hewison
Founder and Director
31 Aug 2009

Advisors call on ASIC to crack down on industry standards, not just fees

Australian investors will remain vulnerable to the financial advice of ‘bad apples’ in the industry if the Australian Securities and Investments Commission (ASIC) ignores its responsibility to raise industry standards, says a leading practitioner.

The comments come in the wake of ASIC’s recent submission to the Parliamentary Joint Committee inquiry into Australia’s financial products and services. In its report, the Committee argued that asset-based remuneration equated to product sales incentives and could therefore contribute to disasters such as the Storm margin lending fiasco.

John Hewison, CEO of Wealth Management firm, Hewison & Associates, and campaigner against investment commissions, has called on the regulator to stop viewing the industry’s remuneration methods in isolation and “to get serious about setting and enforcing standards that protect investors from bad practice.”

“We have long supported the banning of asset-based remuneration (commissions) paid to financial planners and their employees, but for ASIC to hang its hat entirely on remuneration methods as the root of all evil shows a lack of accountability for enforcing its own regulations,” Mr Hewison said.

“The missing link in ASIC’s recommendations is that it fails to acknowledge unacceptably low educational standards for licensees and a failure to regularly audit practicing standards.

“Consumers would be horrified to learn that the regulatory education standard for an authorised advisor is equivalent to sub diploma standard, and that it can be ‘fast tracked’ in around 6 weeks. This is unacceptable and must be lifted to at least Advanced Diploma level or preferably Bachelor Degree standard,” he said.

Mr Hewison added that given an authorised advisor could provide advice on a range of significant financial decisions, including large margin loans, detailed retirement plans and other life-changing investment decisions, education standards are particularly important.

Hewison has called on ASIC to partner with the Financial Planning Association (FPA) in imposing an obligation for AFS licensees to undergo a regular audit on practicing standards and impose heavy fines or license suspension for failure to comply with these standards.

“Without question, the majority of financial planners act in the best interest of their clients, but as in any profession there are those who may allow self interest to override their fiduciary responsibility,” Hewison said.  “There needs to be accountability for those acting under the regulator’s licensing regime, and that is ASIC’s responsibility,” he concluded.

John Hewison CFP, FFPA, MFinPlan, JP is CEO of Hewison & Associates, a Melbourne-based private client wealth management firm operating since 1985. He is a former Chairman of the Financial Planners Association of Australia and a vocal advocate for reform in the financial planning advisory industry.

Download article Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.