No Confidence

Almost half of financial advisers have no confidence at all in ASIC’s ability to monitor and prevent malpractice and financial product collapses, and almost two thirds disagree that payments from product manufacturers to financial advisers should be ceased.

Four out of five respondents (79.4%) feel advisers are being unfairly targeted, and more than half (57.5%) expect their professional indemnity insurance premiums to increase if the recommendations are adopted.

These are some of the headline findings of new research on the Ripoll Inquiry, carried out by CoreData last week.

Almost two thirds of respondents (64.3%) disagree that payments from product manufacturers to financial advisers should be ceased and three quarters (76.8%) do not agree that conflicts of interest will be stamped out if the recommendations are adopted.

While 89.3% agree financial advisers should have a fiduciary duty to place clients’ interests ahead of their own, opinion was divided over the impact this would have on the advice industry.

When asked which recommendation would have the biggest impact on the advice industry, ceasing commissions received the highest number of votes (44.6%) followed by legislating to ensure a fiduciary duty (20.2%).

However when asked which recommendation would have the least impact, fiduciary duty again received the second highest number of votes (18.5%).

The research shows that advisers are polarised over the impact of this recommendation. While overwhelmingly in support of the fiduciary duty, many planners do not think this will have an impact since they already put their clients’ interests ahead of their own.

Three quarters of advisers (76.4%) believe the changes, if adopted, will bring big changes to the advice industry but many are sceptical of ASIC’s ability to monitor and prevent malpractice and financial product collapses, even with increased powers.

Only 1.3% of advisers are fully confident in ASIC’s ability to do this, and more than two thirds (69.5%) disagree that ASIC does a good job of regulating the financial advice industry.

“Opinion is split over whether the extended powers granted to ASIC in the Ripoll report will improve regulation of the financial advice industry, with 45.5% saying they won’t and 41.7% saying they will.”

Other major findings:

• Almost half of respondents (49.2%) have no confidence at all in ASIC’s ability to monitor and prevent malpractice and financial product collapses
• Three out of five (61.4%) agree ASIC has sufficient powers already
• Four out of five (83.6%) say the recommendations will increase costs for financial advisers
• A whopping 97% support making the cost of financial advice tax deductible for consumers
• Two out of five (42.5%) do not support the establishment of a statutory last resort compensation fund for investors, while 30% do
• Opinion on how the changes could affect consumer confidence was varied, but more advisers (50.2%) agree they will improve consumer confidence than those who don’t (47.4%)

The research was conducted on Wednesday and Thursday, November 25 and 26, 2009 by CoreData and included more than 200 advisers, predominantly financial planners and practice principals.