The Financial Planning Association (FPA) said the key findings are a blunt prompt to financial regulators and product manufacturers to demonstrably lift protection and disclosure standards in the interest of protecting Australians from further fraudulent actions and criminal attack on their life savings.

“Today’s findings from the Parliamentary Joint Committee (PJC) review of the collapse of Trio Capital remind us that the client-first principle must apply as an iron-clad undertaking by all industry participants and those who oversee the sector,” said FPA CEO Mark Rantall.

The PJC acknowledged that the collapse of Trio did not result from a failure of advice. Rather, it was a pre-meditated and sophisticated fraud, which went undetected over years, despite several audits by regulators. A tip-off by an alert industry participant led to the uncovering of the fraud by ASIC.

“The details of this case, including the sad loss of capital and destruction of investor savings, remind us that vigilance and higher standards are required in the system. Australia is a global model for retirement savings, but is also the target for offshore attack from predators.” 

FPA acknowledged the PJC recognition of the FPA’s position calling on higher standards for related gatekeepers including regulators, auditors, custodians and research houses.

Together with the Richard St John report there is now improved public awareness and acknowledgement that consumers must be protected from all participants – including financial planners – within the financial services sector.

FPA supports the PJC recommendations, in particular the specific recommendations related to Self Managed Super Funds, increased disclosure, improved checks and balances to better detect signals and greater powers and emphasis on superannuation fraud by the regulators and the Australian Federal Police (AFP).

St John compensation recommendation
The FPA further supports the PJC recommendation against the need for a compensation scheme, a finding which mirrors recent recommendations by Richard St John.  A separate levy on SMSFs would not be appropriate and potentially undermine the reasons of choice and flexibility which lead many consumers to invest in a SMSF.

The FPA agrees with the committee’s assertion that financial professionals such as financial planners and accountants need to act in the client’s best interest when recommending a SMSF to clients.

The FPA strongly believes that FOFA along with the removal of the accountant’s exemption will go some way in helping with this.

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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.

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