CONSUMERS struggle to judge whether they have received poor quality financial advice, the results of a "shadow shopping" sweep by the corporate regulator have revealed.
The Australian Securities and Investments Commission late yesterday unveiled the final results of a secret exercise testing the standard of retirement advice around the nation, revealing a stark contrast between how consumers felt about the advice they received and the standard of that advice.
The 64 consumers that took part were overwhelmingly happy with the advice provided by their financial advisers, with 86 per cent rating it as "good quality" and just 5 per cent rating the advice provided as poor. About 81 per cent said they trusted the advice they received "a lot".
But 39 per cent of the retirement advice examples, when later reviewed and assessed by ASIC analysts, were found to be of poor quality, with 58 per cent rated as "adequate" and just two rated as "good".
"The research highlights the important position of trust that advisers are in when giving financial advice," ASIC said. "Because it is difficult for clients to assess the quality of the advice, it is crucial that licensees ensure that their advisers provide good quality advice."
The plans were provided to consumers aged between 50 and 68, who were seeking financial advice for their retirements. In 78 per cent of the advice examples, the adviser was paid through product commissions or fees based on a percentage of the clients' assets.
The release of the shadow shopping report follows last week's passing of the government's Future of Financial Advice reforms, which included a ban on commissions and a requirement for planners to act in their clients' best interests.
ASIC said the results of the sweep some of which were unveiled in January showed "scope for significant improvement". "Our research found there are several areas where the financial advice industry needs to lift its game," ASIC commissioner Peter Kell said.
He said it was not surprising that consumers had difficulty assessing the advice they received, saying those who understood personal finance were less likely to need a financial planner.