Royal Commission must cast net wider

The next fortnight will see the Royal Commission grill some of Australia's biggest providers of financial advice, albeit with some noticeable absences.

During the Commission's second round of hearings the big four banks and AMP will appear, as will privately-owned dealer group, Dover. However, there are commentators suggesting the advice provided by industry superannuation funds is being overlooked.

Adding fuel to these calls was a February hearing of the Parliamentary Joint Committee on Corporations and Financial Services - where ASIC deputy chair Peter Kell conceded the regulator has failed to effectively monitor advice provided by industry funds for its compliance with the best interests duty introduced under the Future of Financial Advice (FoFA) reforms.

Responding to questions about ASIC's investigation into vertically integrated entities, Kell said: "We are looking at other aspects of advice and performance in some of those large firms."

He added: "Adherence to the relatively new best interests duty is still an area where the industry as a whole - big firms and small firms - have some work to do. It is a relatively new law and there is a journey here to go through."

It's leaving some in the advice industry concerned that the scope of the Royal Commission's inquiry is not wide enough, leading to a Royal Commission 2.0 down the track.

Robina Financial Services director Troy Theobald says he is yet to be convinced that advice provided by industry funds, given its largely phone-based nature, meets the best interests duty.

"For most people their super is their largest financial asset. Any advice that makes such a massive difference to a person's ultimate retirement should be personal advice and should not be conducted by way of a generic phone conversation," he says.

This said, retail and industry superannuation funds are likely to appear before the Royal Commission in a separate round. The inquiry, after all, has a remit to detail misconduct in the banking, superannuation and financial services industry.

The Commission must also inquire whether superannuation entities have misused members' retirement savings.

Citing Productivity Commission reports, the Royal Commission notes superannuation and retirement advice is the most common type of financial advice sought by consumers. It represents about one-third of the $4.6 billion in annual financial planning revenue.

Industry Fund Services chief executive Cath Bowtell says she would welcome any review into the quality of advice provided from advisers licensed by IFS.

"We continuously improve our quality assurance regime, and any input from the regulator would feed into that process," she says.

The Royal Commission's advice background paper states "the proliferation of financial products with trivial economic differences makes comparing features and prices almost impossible for consumers."

IFS is also concerned with changes in the advice landscape driving costs higher and higher.

"Any review of financial advice in the not for profit super sector should not only address technical compliance, but also the extent to which the consumer protection regime promotes better outcomes for ordinary working Australians, including whether the current regime facilitates or inhibits the delivery of advice in a cost effective manner," Bowtell says.

This is an extract of a news story first published in the latest issue of Financial Standard. You can view the full article on our free iPad app.

Read more: Royal CommissionAustraliaIFSASICCath BowtellPeter KellProductivity CommissionRobina Financial ServicesAustraliansDoverFinancial StandardFuture of Financial AdviceIndustry Fund ServicesParliamentary Joint CommitteeTroy Theobald
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