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Figures frequently fail the test

FEATHERS have been ruffled in the world of financial planning and advisers of late, with many either ducking for cover or going on the attack in response to a survey carried out by the Australian Securities and Investment Commission and Choice magazine.

The survey, which was released last month by ASIC, found many people were not getting the quality of advice they deserve.

The results have been born out by ASIC activities and surveillance of the industry.

ASIC executive director of Consumer Protection Peter Kell said it was a timely wake-up call to the financial advisory industry that significant improvements were needed.

“In the past two years ASIC has removed 62 financial advisers from the industry, and a further 10 have received jail terms,” he said.

“We are carefully assessing the information from the survey to identify what future actions we will take.”

As part of the survey, customers were recruited and obtained 124 financial plans from advisers around the country.

More than 50 per cent of the plans were considered ‘borderline’, ‘poor’ or ‘very poor’ in quality.

Common deficiencies in plans included failure to provide an advisory service guide or to show how the recommended strategy and action was appropriate for the client.

Some planners ignored key client requirements and provided reams of generic information that made the plan hard to follow.

In other cases, higher fee investments, such as some wrap accounts and master trusts, were recommended without showing why these were better than cheaper alternatives. Some planners also advised a switch into new investments without showing why they would be better than existing investments.

Financial planner Nick Bruining acknowledges that it can be difficult to find a good adviser but said it was up to investors to do their home-work.

“When you’re looking for a planner, you’re in charge. Remember, you’re effectively interviewing planners for the job of assisting you with your finances,” Mr Bruining said.

“You’ll find that, by taking that approach, many will be weeded out even before the first interview.”

A good starting point, he suggested, was to read what ASIC advises. ASIC has produced a publication called Don’t kiss your money goodbye, which can also be found at the www.asic.gov.au, offering advice on how to pick a planner.

“You need to be able to screen the good guys from the bad guys,” Mr Bruining said.

Speaking to families and friends about their experiences with particular advisers is perhaps one of the first things that should be done.

Next, Mr Bruining said it was important to find out who the adviser worked for.

“If they worked for boutique firms they tend to be very concerned about compliance issues probably because they have more to lose,” he said.

The adviser’s qualifications also were an important consideration, he said.

In the meantime, ASIC has warned that it would be undergoing screening of its own in response to the survey.

It is planning to meet with firms that gave a ‘very poor’ plan to ensure that weaknesses are promptly rectified.

“This is a hugely important industry for Australians, especially retirees, and they deserve comprehensive, unbiased advice from efficient and effective advisers,” Mr Kell said.

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