The FSI identified the need to better align the interests of financial services providers with those of consumers to ensure better consumer outcomes.
The following strategies have been recommended to address some underlying issues:
- Raising standards of conduct and levels of professionalism: This aims to address concerns regarding organisational cultures that do not focus on consumer interests, which contributes to the lack of confidence and trust in the financial system. One suggested method of raising industry standards is to introduce or enhance individual or industry codes of conduct.
- Enhancing scope of banning power: ASIC currently has the power to ban individuals from providing financial services. However, the FSI has recommended that ASIC should also be given the power to ban individuals from managing a financial services licensee, authorised representative or credit licensee.
- Implementing level commission remuneration structure for life insurance advisers: The longstanding practice of charging high upfront commissions for life insurance advisers has affected the quality of advice. This creates an incentive for advisers to make a sale, rather than provide strategic advice. The FSI has recommended that the Government amend the law to require that any upfront commission for life insurance advice is not greater than ongoing commissions. However, the level of commission should be left to the market and industry. Banning commissions should be considered if this strategy is unsuccessful.
- Review of current remuneration practices in stockbroking: There are concerns that ‘grid’ commission structure implemented in Australia may create potential conflicts of interest between advisers and consumers. In most major financial centres, stockbrokers are paid a salary and discretionary bonus. The FSI recommends that ASIC undertake this review for the purpose of advising the Government on whether action is needed.
