Australian consumers seeking compensation from poor financial products and advice will benefit enormously from the excellent recommendations released in today’s Compensation Arrangements for Consumers of Financial Services report, authored by Mr Richard St John.
The Financial Planning Association (FPA) has long expressed its concern that Australian consumers deserve better access and justice in compensation for poor financial advice and most importantly poor financial products.
The FPA has welcomed the St John report’s findings and has urged the Gillard Government to not lose sight of these vital consumer recommendations in the days following tonight’s federal Budget.
“The focus might be on Wayne Swan’s Budget surplus tonight, but all professional planners are cheering a massive ‘consumer surplus’ delivered by Richard St John this afternoon,” said FPA Chief Professional Officer Deen Sanders.
“This is a thorough review. Its conclusions are welcomed – including the need for careful redress of regulatory imbalances before considering any ‘last resort’ compensation scheme as a solution for retail client compensation.
“In other words, the report recognises that obligations on the licensed financial advice community have been ‘unbalanced’ in comparison to the light-handed regulatory approach of product issuers. FPA supports the call for a review of conduct and disclosure as well as compensation obligations of the product issuers,” Dr Sanders said.
FPA particularly endorses the comments made by Mr St John in his report, including acknowledging that:
- Getting this reform right is vitally important because there is a glaring need for the right form of compensation structure to exist to protect consumers from poor advice outcomes and poor financial products
- There are too many potentially inappropriate consequences from a last resort scheme that punishes those least likely to engage in inappropriate conduct and would still leave consumers deeply exposed unless the terms of the compensation fund are satisfied.
There are worrying limitations of the existing PI Insurance arrangement that disadvantage consumers and advisers.
The FPA supports the recommendations to:
- Review the regulatory environment for product issuers and expand access to compensation for consumers to product manufacturers and potentially other gatekeepers
- Strengthen the role of ASIC in oversighting compliance and the adequacy of insurance cover
- Support the FPA’s long held view that Financial Advice Licensees should be able to draw Product Issuers and other ‘at fault’ parties into compensation considerations on a ‘proportionate liability’ basis
- Dr Sanders noted the acknowledgements made by Richard St John in regard to the FPA’s strong involvement as the only professional advice body to provide a comprehensive submission and extensive follow-up to the review.
The report makes extensive reference to submissions made by the FPA, and acknowledges FPA’s support of the professional and ethical standards of its members.