OZschwitz: The fraud of financial planner licensing and its consequences

The regulatory system for financial advice has failed investors and needs a complete overhaul. If anyone is in any doubt about this, look no further than the submissions received so far by the parliamentary inquiry into financial products and services.

The submissions tell a sorry tale of an industry that is needed but too often fails to deliver. Westpoint. Fincorp, Australian Capital Reserve and other high-risk debt offerings. Basis Capital. And more recently, Storm Financial. All high-profile failures that have left small investors high and dry, and all involving, in some way, financial advisers.

The submissions to the parliamentary inquiry pick up the inevitable festering sores of commissions and conflicts of interest. While the bulk of the industry still refuses to see these as a problem, there is little doubt unhappy investors do. He who pays the monkey calls the tune.

But the inquiry is also highlighting the gaping holes in the regulatory system which assumes pages of legalistic fine print provide adequate protection for investors.

A common theme in submissions by Storm Financial clients is trust.

"Like the many other investors … [we] were simply after a comfortable life in retirement that did not rely upon … handouts," writes one of these investors. "We thought we had a secure financial plan for our future and that of our children.

"Storm Financial, the banks and the margin lenders are the experts we entrusted to provide us with this advice. We relied upon them to guide us and direct us in the safe, secure and correct path with our investment.

"Our life as we had it no longer exists. Carrying on day to day is hard, sleeping is hard, trusting is hard and trying to move forward in an environment where there is no longer respect for those experts is incredibly difficult. How do we invest for our future when investing got us into this position in the first place? Who are the experts we are to trust now?"

Another writes: "We trusted and believed all we were advised to do because they were an accredited ASIC licence securities dealer.

"Who can you trust if not someone the regulator has approved?"

Not being experts themselves, Storm's clients - like many before them - assumed their licensed planner would do right by them.

But the law sees things differently. While advisers are required to base their advice on your needs and circumstances, and to give you a written statement explaining the basis for that advice, the final judgment is up to you.

LNK

OZschwitz: The fraud of financial planner licensing and its consequences

OZschwitz: The fraud of financial planner licensing and its consequences

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