CHOICE welcomes Ripoll inquiry recommendations
Financial duty of care can put paid to commissions
CHOICE welcomes the recommendations of the Ripoll inquiry especially the call for financial planners to have a fiduciary duty included as part of their licence conditions to ensure their clients’ interests are placed ahead of their own.
In their submission to the inquiry the consumer group had asked for such an obligation. It had also asked for the regulator, the Australian Securities and Investments Commission (ASIC), to be empowered to exclude conflicts of interests which might breach the fiduciary duty.
“It’s difficult to see how a financial planner could both owe a fiduciary duty to the client while at the same time be taking commissions and fees for selling them financial products,” said CHOICE spokesman Christopher Zinn. “While there is no overt ban on commissions in the recommendations this goes pretty close.”
CHOICE was also pleased to see the recommendation that the industry develop ways of ending payments from the product manufacturers to financial planners. But it was cooler on the call for more disclosure from advisors about potential conflicts of interests in their marketing materials.
“While useful information is always welcome we believe disclosure is a poor solution to combating conflicts because it can’t overcome the distorting influence of commissions,” said Mr Zinn.
CHOICE also backs the recommendation for a statutory last resort compensation fund where advisors had breached their licence requirements.