The director of an independent advice association has called on the industry superannuation fund sector to change its lobbying approach with the government to include a focus on ASIC and greater monitoring of investment products.
In a letter to ASIC chair Greg Medcraft, Financial Services and Superannuation Minister Bill Shorten and independent MPs, Association of Independently Owned Financial Planners executive director Peter Johnston said the government's Future of Financial Advice (FOFA) reforms on their own would not stop the issue of product failure.
Johnston highlighted a number of the government's planned regulations as being either relevant or irrelevant for the industry.
"Banning product commissions and volume rebates, although now largely non-existent, is the best aspect of FOFA. Market pressure, self-regulation and the demise of the MIS (managed investment scheme) agribusiness style of products over the last five years has seen over 80 per cent of the market now charging clients on a fee-for-service basis," the letter said.
Johnston said the government's opt-in ruling, coupled with its best interests decision and planned removal of risk commissions, were irrelevant for the industry and would not stop products failing.
"The greatest misery for consumers is product failure. Regardless of how experienced or well-educated advisers are, if flawed products are allowed to escape through the net, something has to be done about the net. Fumbling around with the irrelevant FOFA issues is meaningless," he said.
He said ASIC's legal "buck passing" over why an adviser used a "failed product" with a client must stop.
"How can advisers sitting in their offices detect problems when professionals paid to do their job diligently and from a far better vantage point cannot? This is the massive conundrum facing the industry. Continued legal buck passing onto the advisers is not going to easily get clients their money back or stop products failing. This charade has to stop," he said.
"We need the industry fund lobby to change tact and assist consumers by convincing the government to put more resources into ASIC at the front end of consumer protection with assessing products before market release."
The AIOFP has had a small exposure to product failures, including Trio Capital and Astarra Asset Management, with seven out of the association's 150 practices involved.
