Financial services consumer advocate Peter Mair writes:

Three years on, ASIC’s second shadow shopping survey of
financial planners and advisers again reveals the very real problems one would
expect from the commission-driven sales culture still rife in the “profession”
of financial planning in Australia. The detail – revealed by some and glossed
over by others – will be in the mainstream media tomorrow: take note of who
says what as a guide to trustworthy media commentators.

Behind a
likely “glow” of how things could be even worse is a critical
admission that the ASIC survey did not assess “whether the best advice
was given”. For reasons never adequately explained, the rules ASIC
imposes on financial planners require only that the advice given
to their clients is “appropriate”. One irony is that ASIC itself – and
the very useful Financial Information Service available
at Centrelink – is not permitted to identify the
characteristic advice that would be considered “best” by most
independent commentators and industry rating agencies.

As can be seen
in the survey report, ASIC is limited to making obscure and qualified
allusions to the probability that most Australians would be best
advised to put their superannuation savings with the so-called
“industry funds” for which Bernie Fraser has been the
frontline advocate (these mutual organisations do not pay
commissions to salesmen and typically return the highest
earnings to their clients).

It is simply not acceptable that the only people licensed to
give financial planning advice are most likely to not give the advice
that would be considered “best” or “most appropriate” – it seems the
Kafka-Orwell kids are still “advising” the Australian government.

Find me one client
of a financial adviser who asks for less than the “best” advice that
the planner – claiming to be a well-informed professional – would
implicitly be be expected to give. One can only wonder about the
rationale of a regulatory regime that allows these “professionals” to
give advice more likely to be in their own interests than the
advice most likely to be “best” for the client. One can only wonder
why the Howard government typically applauds this deceptive and
misleading regime rather than demanding that it be reformed.

One does not need costly and time consuming shadow-shopping
surveys to discover that most clients of financial planners – trusting that
they will be given advice that is in their best interests – are in fact more
likely to be advised to do things more in the venal interests of
the adviser. This is an outrage – and the ASIC survey report includes
indictments, cases where clients have been substantially disadvantaged.

Anyone approaching a “licensed” professional financial adviser
for advice should be encouraged by ASIC to get a written conformation that the
advice given is the “best” for them – such undertakings should not be needed
but, with one in hand, it would be easier to prosecute a demand for
restitution of the consequential loss arising from accepting advice reasonably
(and clearly) known to have been substantially inferior when it was given.

…. and tomorrow, take no notice of pious reports of
planning industry intentions to better manage in future the conflicts of
interest to which financial planners typically now yield: rather ask “what has
the planner profession done to correct the ‘bad’ advice already given to its
clients and from which the advisers continue to take ‘trail’ commissions to
which, in all honesty, they were never entitled to take?” Listen to the stunning
silence of the reply.