Three-quarters of financial advice in Australia doesn’t comply with the in the “best interest” of customers test, according to numbers compiled by the corporate watchdog ASIC.
And the figures gets worse for setting up self-managed super funds, with 9 out 10 advisers not considering the best interests of clients, according to a survey of financial services licensees.
The best interest duty is part of the Corporations Act, and requires advisers to act in the best interests of the customer and prioritise a customer’s interests over their own or those of a related party.
Peter Kell, deputy chair of ASIC, told the Financial Services Royal Commission it’s hard to generalise.
“It’s very disappointing to say the least,” he said in reply to a question.
However, he says the numbers don’t necessarily mean those customers suffered a loss.
Earlier in the hearing, the commission was told that $383 million in compensation has been paid to consumers for poor advice.
The number of financial advisers in Australia has increased to more than 25,000, from about 18,000 at the end of 2009, but only 35% of these had informed ASIC that they had a university degree.
Kell says ASIC is aware of eight companies charging fees for no services: ANZ Bank, the Commonwealth, NAB, Westpac, AMP, Yellow Brick Road, First State and Bendigo Bank.
“I think it’s clear from our experience that the firms in question prioritised fee revenue from their advice businesses over the provision of services to the clients,” he says.
Australia’s major banks face 15 different major inquiries, including the Royal Commission, following a series of scandals involving giving poor financial advice to customers.