A SWEEP by the corporate regulator has uncovered "disappointingly high" levels of poor-quality advice provided by financial planners.
As a war of words continued yesterday over the federal government's planned reforms to financial advice, the Australian Securities and Investments Commission released the first results of a "shadow shop surveillance" of advisers last year.
ASIC, which used real consumers seeking retirement advice, revealed that of the 64 plans provided, more than a third were rated as poor, 61 per cent as adequate and just 3 per cent two good.
ASIC commissioner Peter Kell noted a "consistent failure" by advisers to talk to clients about what their retirement savings could realistically fund, with many plans containing "woefully inadequate projections" and "poor or unrealistic" technical assumptions. There was too much generic advice, Mr Kell said, and conflicts of interest remained a problem.
ASIC unveiled the results at a parliamentary committee hearing examining the government's proposed Future of Financial Advice laws. The laws, sparked by damaging investment collapses such as Storm Financial and Westpoint, will require financial advisers to act in their clients' best interests, ban conflicted payments like commissions, and boost the regulator's power to refuse or cancel financial services licences.
The government says the reforms will increase consumers' access to advice. But industry groups warn that the associated costs of the reforms $700 million, says the Financial Services Council will make advice less affordable and result in big job losses in the sector, as many as 35,000, according to the Association of Financial Advisers.
That figure was labelled "silly" by Treasury official Jim Murphy at yesterday's hearing. Mr Murphy pointed to IBIS research that adviser numbers would grow 2 per cent to 2015.
According to Rice Warner research cited by the government last year, 6800 planners will leave the industry by 2024. But Mr Murphy said that research commissioned by the Industry Super Network had factored in a ban on insurance commissions, which did not eventuate.
Industry groups, including the Australian Bankers Association, the FSC and the AFA, have pressed for changes to the proposed laws, and for their introduction to be delayed by a year to July 1, 2013.
The opposition has attacked the present laws for imposing "excessive and unnecessary" red tape.
Much of the contention centres on a new "opt in" requirement, under which advisers must send clients a renewal notice every two years, and a new requirement to send clients an annual statement of fees charged and expected to be charged.