The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Hayne Royal Commission) has exposed significant problems in the financial industry in Australia. These include advisers failing to act in the best interest of their clients, conflicted remuneration structures that lead to poor or inappropriate outcomes for clients, and an industry dominated by vertically integrated firms that puts the interests of the firms before those of their clients. As a result, the public has lost confidence in the industry and has little trust in it. It is imperative that the financial industry and other stakeholders, including government and regulatory authorities, take decisive, visible actions to restore public trust and confidence.
CFA Institute and CFA Societies Australia do not see a single solution to the problems highlighted by the Hayne Royal Commission. Rather, we believe that reforms are needed in several areas, and that all these areas must be addressed together to ensure better outcomes for financial advice industry clients.
In responding to the Hayne Royal Commission, we focus on the issues relating to the ability of consumers to access financial advice and products, as this is the area that is the most relevant to our mission.
Prior to the Hayne Royal Commission, Australia has had many inquiries and reviews of the financial sector, which have produced a long list of recommendations, ranging from structural reforms and policy changes, to establishment of new regulatory bodies, to moves to improve professionalism and education standards in the industry. It is clear that the effectiveness of reforms to-date has been questionable and there is still much room for improvement in terms of outcomes for consumers. Strong steps must be taken this time to ensure genuine, lasting change in the financial advice industry in Australia. Without such steps, problems will continue to recur, with no real change in the way businesses operate, as they have, following previous inquiries.
CFA Institute and CFA Societies Australia believe policy needs to focus on several key areas to improve the outcomes for consumers accessing financial advice and products. The changes we recommend here would improve the public perception of the industry and help deliver better outcomes for the investing public. Our recommendations fall into four areas: strengthening best interest duty and ensuring appropriate consequences; fees and conflicted remuneration; ensuring independence of advice; and the professionalisation of the financial advice industry.
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