Financial product providers should be banned from paying commissions to financial advisers who recommend their services, a Parliamentary inquiry into the financial planning industry has found.
The report, presented to Federal Parliament last night, contains 11 recommendations including reforms to the way financial planners are paid along with increased transparency.
One such recommendation involves commissions for financial advisers, with committee chairman Bernie Ripoll telling reporters after tabling the committee’s final report that there exists a conflict of interest with financial advisers being paid commissions, which results in inappropriate advice being given.
“There exists a conflict of interest, (with) financial advisers being paid by product manufacturers to sell particular products to clients, and that conflict of interest … results, at times, in inappropriate advice,” he said.
“Our view is that you must provide quality advice that must be in the best interests of the client… one way to achieve that is to cease payments from product manufacturers such as commissions and bonus payments,” he added.
National law firm Slater & Gordon has welcomed the report, saying it is an important step forward in shaking up an industry that needs a major overhaul.
Damian Scattini, Slater & Gordon group practice leader and lead lawyer in the Storm Financial case said if the recommendations are adopted by the industry and the Government then it will provide important protections for small unsophisticated ‘mum and dad’ investors.