At CHOICE we work on a lot of issues, but the one that just won't go away is the impact of shoddy financial advice on consumers.
On top of the heated political debate about the Future of Financial Advice (FoFA) laws over the past year, financial advice scandals have hit most of our major financial institutions – the most recent involving ANZ charging clients ongoing fees for advice they never received.
Off the back of these scandals, the government led a process to improve educational and professional standards, so that we no longer have a situation where somebody can put up their shingle as a financial adviser after less than a week of study.
We're not sure whether to be happy or angry – happy because the deep problems in the financial planning sector are getting the sustained attention that they deserve; or angry because we've been banging on about these issues for years and should not have had to wait for so many consumers to lose so much money.
At the heart of the FoFA laws was a ban on conflicted remuneration – sales incentives that encourage advisers to put their interests ahead of those of their clients. This ban only applied to advice in relation to investments, but these problems are not unique to investment advice.
Late last year, an ASIC report on advice to consumers about life insurance identified 'an unacceptable level of failure', with many examples of advisers putting their own interests ahead of their clients'.
The new Assistant Treasurer, Josh Frydenberg, has backed these concerns, writing in the Australian Financial Review in April that "the upfront commission model has driven a misalignment of interests between insurers, the adviser and the client".
Last month, CHOICE demonstrated that these problems aren't limited to investments and life insurance.
In Uta Mihm's excellent investigation of the mortgage broker industry, five consumers 'shadow shopped' three major broking businesses. Of the fifteen instances of advice they received, only one was rated as 'good' by our expert panel, with seven coming up as 'poor'.
Advisers pushed products that were not best for the client and attempted to upsell to high-risk options. Once again, there's the issue of commissions: where advisers or brokers are paid based on the products they push, the incentives are tipped against consumers.
There's a basic principle at play here: if you see somebody who claims to be a professional adviser, you should get professional advice. And that advice should reflect what's best for you.
Until you can have confidence in advice, we'll keep investigating and campaigning to clean up the industry.
Alan Kirkland, CEO