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Do you trust financial advisers?

Glenn Freeman  |  20 Jun 2016Text size  Decrease  Increase  |  

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Low levels of consumer trust and confidence in financial advisers has been a common theme followed by Australia's media in recent years, as high-profile cases of adviser misconduct have been unearthed in some of Australia's largest banks and financial services institutions.

Only 24 per cent of Australians trust financial advisers, according to an April 2015 study conducted by research organisation Roy Morgan.

Protecting investors from bad financial advisers is a key role of the Australian Securities and Investments Commission (ASIC). The Financial Adviser Register (FAR), which launched just over one year ago, is a prominent tool designed to further this cause.

Hosted on ASIC's consumer-facing portal, Moneysmart, it outlines the name, employment history, Australian financial services licensee and controlling entity, adviser qualifications and any professional memberships.

One of the most recent upgrades included a partial merging of ASIC's banning register with the FAR, which indicates whether individual advisers have been subject to any disciplinary action.

The FAR has been used almost 1 million times since it was launched in March 2015, according to Joanna Bird, senior executive leader, financial advisers team, ASIC.

As of 14 June 2016, it listed the details of just over 23,000 individual financial advisers, including all those providing advice on investment products and life insurance to retail clients.

In terms of monthly views, these peaked at 45,000 last May, after the site launched, but according to Bird, unique visits to the page have continued at similar levels.

While it isn't known how many of these visitor numbers are broken down across consumers, advice businesses, ASIC and other audience groups, she believes consumers account for most of these.

The Moneysmart website was visited by more than 6 million unique users between June 2015 and May 2016--with 670,000 unique users last month.

First centralised list of all advisers

"All individual financial planners should be on the register. If you go to see a financial planner and you don't see them listed in there, it should ring alarm bells for you," Bird says.

She believes the launch of the register was significant because, "for the first time, [it means] we can actually see who that population [of advisers] is, where they are, who they're working for, where they've been working and how many times they've moved around".

"It's the first time that info has been available to anyone, including the regulator. When it came in, it had three purposes, but the primary one was to help consumers, to help them make better decisions about how to choose an adviser."

Helping AFS licensees and the regulator to reference check and keep track of individual financial advisers were secondary aims of the register.

More visibility needed

The Financial Planning Association of Australia (FPA) was among a number of organisations that worked with ASIC ahead of the launch of the register.

Dante De Gori, chief executive officer of the FPA, emphasises many of the same elements of the register as Bird.

"We advocated very hard for the need to have a national public register. It can serve, and will serve, a consumer benefit. It will also serve a benefit in the sense that it will assist the industry to deal with that whole 'bad apple' issue of people moving around to find a licensee of last resort," he says.

However, he also says the level of awareness of the tool among consumers is not yet high enough, which significantlly restricts its effectiveness.

"I would say the awareness and understanding from consumers is probably quite low. Advisers aren't getting confirmation from clients that 'we looked you up on the register' and I don't know if there is a current process where advisers are asking that question either," De Gori says.

"One of the things we're pushing for is not only disciplinary actions from ASIC [to display on the register] but from professional bodies. We think it provides an independent source of truth, which will protect consumers ... financial planners that are doing the wrong thing can't hide.

"It will take some time to get there. Industry obviously use it, regulators use it ... but to get consumers to use it, you have to create awareness."

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Glenn Freeman is Morningstar's senior editor.

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