16/07/2002 - 22:00

Advisers lift disclosure

16/07/2002 - 22:00


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PUBLIC surveys consistently show that accountants and family or friends are the most common sources of financial and investment advice.

Advisers lift disclosure
PUBLIC surveys consistently show that accountants and family or friends are the most common sources of financial and investment advice.

The financial planning profession is striving to change this, with a series of training and accreditation measures designed to lift industry standards.

Financial planners have been affected by legislative changes, notably the recent Financial Services Reform Act.

It has led to a substantially increased level of disclosure in the industry, with financial planners now required to provide a series of documents designed to make the financial planning process more transparent.

The first document is a Financial Services Guide (FSG), which is designed to help people choose a financial adviser.

It explains who the adviser is and what kind of advice they can provide. For instance, there are limits on the kind of advice that can be provided by stockbrokers and accountants.

Similarly, the advice that ‘financial planners’ can provide depends on their qualifications and experience.

The highest credential is the Certified Financial Planner designation. A CFP can advise on all aspects of financial planning including investment, estate planning, superannuation, budgeting and savings plans, retirement planning. They also can offer advice on stocks and shares, loans and mortgages.

FSGs also explain how financial advisers charge, whether in fees, commissions or a combination of the two (see article below).

Financial advisers are required to provide their clients with a statement of advice.

This is like a financial plan

and outlines in writing the advice being given, the reasons why the recommendations have been made, any charges or other benefits the adviser is receiving and any association they have with institutions that could influence their advice.

The latter point may be critical, since the majority of financial advisers work for organisations that are owned by banks, fund managers and insurance companies.

In many cases, the connection is not obvious. For instance, Hillross is owned by AMP, Godfrey Pembroke is owned by National Australia Bank and RetireInvest is owned by ING.

It is therefore important to know whether advisers from these or any other group are recommending investment products provided by their owner.

A statement of advice can be prepared only after a financial planner has met their duty of care to ‘know their client’ and understand their particular financial situation and objectives.

A third document, to be provided when advisers recommend a specific investment, is a product disclosure statement. It replaces prospectuses and customer information brochures.

A PDS should include information about the nature of the benefits to be received, significant risks or tax implications associated with investing in the product, terms and conditions, and the fees, charges and commissions.

It should also have information about dispute resolution procedures and the cooling off period available.

A 14-day cooling off period is available to investors in most financial products, such as managed investments, general and life insurance, superannuation products and retirement savings accounts.


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