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A new plan for the financial planning industry

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Published on: Thursday, June 24, 2010

From the corridors of Canberra, they’re changing the rules of engagement when it comes to financial planning and services. Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law, joins Peter Switzer on his Sky News Business Channel program, SWITZER, to discuss industry reform.

Change following a Storm

Bowen says that change has been needed in the financial services and planning industry for some time and the process in getting to this point has been exhaustive.

“If you talk to anybody in the financial planning industry, they would tell you I’ve had an open door to listen to the various views around the financial planning industry about what reforms are necessary to restore confidence in the industry,” says Bowen. “Many in the financial planning industry have welcomed our reforms.”

Bowen credits the main reason for change in the industry being the need to restore confidence in the consumer. This was only solidified by the collapse of Townsville-based financial planning group, Storm Financial.

“There’s no question that Storm Financial brought home many of the problems in the industry. It concentrated in my mind, and the mind of the Australian people, the necessity to life the reputation in the industry,” he says.

“All the good financial planners out there would have had their reputations affected by it. Also, many thousands of people have had their life savings wiped out. We had to do whatever was necessary to remove that possibility going into the future.”

Proactive ASIC

When questioned whether he had the confidence that ASIC could become more proactive to pick up on these problems, Bowen assured that restructuring would create a more alert and active government regulation body. However, he notes that, as a regulator, their scope should be solely on monitoring fair and legal corporate behaviour.

“As the regulator, it is not their job to avoid companies going broke, it’s not their job to avoid bad business models – it’s their job to ensure honest dealings and compliance with the law,” he says.

“It is often difficult for them, in the absence of complaints, to be examining every company in the country. Nevertheless, ASIC has had a significant restructure and there’s been significant changes.”

After-effects of reform

Once the proposed reforms are implemented, how does Bowen see the industry changing?

“I’d like to see financial planning be well-respected, be regarded as a profession and that means after the 1 July, 2012, when these reforms are in place, that people have confidence when they go to a financial planner,” he says. This means that transactions, such as commissions, or other external influences affecting advice given are transparent to the consumer.

“The financial planning industry has a lot of value to add to the Australian economy, they have a lot of value to add to people’s individual wealth and they can, and do, make a difference for people,” says Bowen.

“But we need to make sure that the small number of people who have given the financial planning industry a bad name have their business models removed and that the reputation and professionalism of the industry is enhanced and I think these reforms do so.”

Check out Peter Switzer’s SWITZER on Sky News Business Channel, Monday to Thursday from 7pm.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

 


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