The peak body representing the financial services industry has admitted that an independent external regulator is needed
to stamp out unethical and at times unlawful behaviour.
In the face of worsening image problem after
a string of financial planning scandals, the Financial Services Council (FSC) has recommended that the federal government establish a statutory body to
regulate professional standards within the industry.
The Council's chief executive John Brogden
acknowledges the recommendation reflects the deepening public distrust of
financial advisers and the low qualifications to enter the industry.
"The reality is that public trust is so
low, public expectations are so low, yet public demand for advice is so high
that we have to acknowledge that self regulation has failed and we need to go
to government and independent regulation," Mr Brogden told the ABC.
"At the moment the standards are far too
low - everybody agrees with that. We've seen lots of different suggestions as
to how they might be improved. We've decided to go right over the top of all of
those and call for the creation of a standalone independent statutory
body."
"Self regulation is no longer a credible
option for establishing higher standards."
The surprise recommendation to the
parliamentary joint committee into adviser competency and the Murray Review into
the financial system is being seen as the financial planning industry putting
up the white flag in a hostile consumer and government environment.
The FSC paper calls for the creation of the
Advice Competency Standards Board (ACSB) which would regulate professional
standards and the education of financial advisers.
While the FSC does not specify educational
standards, it says the Board should determine minimum qualifications which
could include a single national exam for potential advisers,
John Brogden acknowledges that higher
regulated standards could hurt veteran planners who have been in business for
decades especially if they don't already possess a university degree.
"I feel very sorry for good professional
advisors who have always acted ethically, have very happy clients, have always
acted in the best interests of their clients who have been dragged down by bad advisers," Mr Brogden said.
"For them I feel very sad that their
reputations have been tarnished."
Mr Brogden says the Board should be funded by
the financial planning industry but have an independent chair and directors.
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